SIX research: majority of asset managers expect T+1 to increase settlement failures

Global asset managers are predicting that a higher rate of settlement failures could be on the horizon as a result of the switchover to a T+1 settlement deadline for US securities, according to new research from SIX.

The 2023 annual Future of Finance report from SIX, canvassed the views of 343 C-suite executives at financial institutions, including asset managers, wealth managers, investment banks, and asset servicers. These institutions geographically span the UK, Germany, Switzerland, Spain, the US, Hong Kong and Singapore.

A majority of the asset managers polled (59%) cited a higher rate of settlement failures as a main consequence of the impending T+1 deadline, while investment banks were looking at the sunnier side of things – seeing it as an opportunity to automate processes, increase efficiency, and reduce costs (47%).

While 47% of institutions surveyed feel it could provide a positive opportunity to automate processes, increase efficiency, and reduce costs, many also believe it will create greater operational complexity for global institutions, with 45% citing this as a main consequence.

Jesús Benito, head Domestic Custody & Trade Repositories Ops., Securities Services, SIX, said in a statement: “It remains to be seen how the transition to T+1 will impact markets, with the move posing unique challenges to every region and financial institution. With this in mind, key market infrastructure entities including regulated exchanges and central securities depositories will play an increasingly pivotal role in facilitating a smooth transition and fostering the collaborative efforts necessary to manage its impact.”

Daniel Carpenter, CEO of Meritsoft (a Cognizant company), said in a statement: “There is an opportunity to increase the efficiency of settlement operations. As it stands market participants are not there yet in terms of having the ability to digitize and aggregate large amounts of trade data from disparate post-trade systems and then automate end-to-end settlement processes that is needed to make the most of the shorter settlement timeline. T+1 is forcing operations teams to think much bigger on their settlement operations and fails management and not treat it as an afterthought. Ultimately, better managing trade fails and improving settlement processes requires oversight of your trades and exceptions on a counterparty basis, which can’t be done effectively in spreadsheets.”

It appears the debate will only grow louder over the coming months, as executives remain divided over the potential consequences of the move to T+1 settlement for US securities.

Read the full report

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