T+1: Complacency before the storm

Our new research report, in partnership with Waters Technology, unveils a pivotal transformation in the landscape of US and Canadian capital markets commencing on May 28, 2024.

Firms engaged in trading across these markets will now be required to settle securities transactions one day after execution, irrespective of their location. This adjustment mandates same-day trade affirmations and impacts downstream processes, marking a significant industry shift. It's widely regarded as a positive stride, with Europe likely to follow suit.

However, despite the compelling risk reduction benefits, not all firms have fully embraced the T+1 settlement, facing challenges related to data management and technology adoption.

Here are the highlights:
  • Transitioning the settlement of securities transactions in the US and Canada from T+2 to T+1 is expected to yield significant results. A majority of respondents (65%) foresee a reduction in settlement risk, while just under half (48%) anticipate decreased margin and funding requirements, alongside a short-term increase in failed trades due to exceptions.

  • The challenges associated with adapting to the upcoming shift to T+1 settlement were identified. About 28% of respondents cited system interoperability and communication challenges as their most pressing concerns. This was followed closely by the shift from manual processing to increased automation when processing transactions and trades.

  • A notable 45% of respondents had not yet initiated their T+1 projects, despite the survey's closing date in early October 2023, only eight months before the T+1 go-live date. This finding indicates a significant number of firms are yet to embark on their T+1 journeys, possibly due to a mix of apathy, inertia, and complacency.

About this paper

Firms from WatersTechnology’s database were invited to complete the seven-question survey underpinning this paper and were not handpicked according to size or the type of capital markets firm they represent. The survey was not marketed exclusively to US-based capital markets firms, given that the changes set to be introduced in May 2024 will impact all firms operating in the US and Canadian capital markets, regardless of their location. Respondents were not incentivized to complete the survey.

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