Citi Report Finds Concerns Over T+1 “Challenges”

A new survey in Citi’s latest edition of its Securities Services Evolution white paper series cites a survey undertaken by the bank highlighting the level of concern in the financial markets industry over next year’s shift to T+1 settlement in US securities markets.

The white paper finds that accelerated settlement is the single largest area of focus across all financial market infrastructures (FMIs) and market participants globally, with 77% of respondents expecting a major impact on their business.

“Our research shows that the rapidly accelerating move to T+1 in major markets poses significant challenges to industry participants, leaving an urgent need to drive innovation, automation and efficiencies in global operating models,” observes Okan Pekin, global head of securities services at Citi.

The white paper includes quantitative and qualitative data gathered from 12 FMIs and industry participants (fintech, taskforces, banks) and almost 500 market participants from banks, broker-dealers, asset managers, custodians and institutional investors around the world.

While the impact of acceleration remains the primary focus, a consensus is also emerging as to how best to prepare for it, Citi says, adding that participants are focusing on clients and counterparties in the first instance; followed by in-house platforms and processes; and evaluating staffing and location strategies. “For example, 69% of those surveyed are focused on automating and standardizing client communications while 64% are looking to upgrade /replace technology platforms,” the bank says.

The paper also finds that for the last three years, cash, funding and liquidity management have been cited as the greatest obstacle to achieving a shortened settlement cycle, and that 80% of market participants expect a notable impact on their securities lending and borrowing business – one of the single most impacted area by the move to T+1.

Additionally, 74% of respondents are engaging in Distributed Ledger Technology (DLT) and digital asset initiatives (up from 47% last year) in what Citi says is “a clear sign that DLT momentum continues to grow”.

This momentum is reflected in a finding that 38% of market participants are today live with digital asset offerings versus 22% for DLT. Citi says there is also a growing belief across the industry that digital money (CBDCs, bank and non-bank issued stable coins) is maturing quickly – an overwhelming 87% see them as a viable means to support securities settlement (vs 72% last year).

“As market infrastructures continue to evolve, it’s increasingly important for industry participants to work in partnership to strengthen the stability of the overall ecosystem,” says Matthew Bax, global head of custody for securities services at Citi.