Securities Industry Advance to T+1 Slows

With just over one month to go until North America switches to T+1 settlement in its securities markets, new data released by infrastructure provider DTCC shows that progress is barely advancing and that the industry still has much work to do.

DTCC says its latest analysis shows that in March, 74.95% of transactions were affirmed by the cut-off time of 9:00pm ET on trade date, a fraction higher than the 74.5% in February. When considering specific market segments as of the end of March 2024, DTCC says the prime broker affirmation rate was flat at 83%, however it does say its expects this rate to increase as more prime brokers move to real-time affirmation.

There was better progress elsewhere, with the investment manager auto-affirmation (central match) rate rising to 91% from 89% in February. DTCC says its Institutional Trade Processing (ITP) added 30 new Investment Managers to the CTM auto affirmation workflow, bringing the current total of managers using this capability to 399, of which 280 are enabled for CTM’s Match to Instruct (M2i) workflow. “As Investment Managers continue to on-board and configure their Brokers, this rate will continue to increase,” DTCC states.

Finally, the custodian or investment manager (self) affirmation rate also rose two points to 55%. DTCC says it continues to work closely with the custodian community to advocate for improvements in affirmation rates. “To increase operational efficiency, custodians are advised to encourage their clients to get their own TradeSuite IDs rather than relying on their custodian’s omnibus account,” DTCC states. It adds that over 1,370 TradeSuite IDs were added in Q1 2024, providing managers with greater transparency into affirmation rates. “Additionally, an investment manager that is already live on CTM can activate auto affirmation and enable M2i,” the utility observes. “This helps achieve significantly higher affirmation rates.”

The progress in the underlying markets is important to the FX world, if it is to be able to help investment managers effectively and efficiently execute their hedges in good time. “With a little over one month left until the T+1 deadline, market participants must accelerate their preparations and readiness,” warns DTCC. “Improvement in affirmation rates – aided by technology – can reduce the likelihood of trade failure and provide needed efficiency to achieve accelerated settlement timelines. Leveraging automation to optimise settlement workflows and implementing straight through post trade processing better positions firms to achieve T+1 settlement.”