UK T+1 Head Issues “Wake Up” Call

With 11 October marking one year until the UK, along with other European jurisdictions, moves to T+1 settlement in its securities markets, the head of the UK’s Accelerated Settlement Taskforce says the anniversary should be a “wake-up” call to firms lagging in their preparations.

In August, the UK’s Financial Conduct Authority (FCA) said it had found that some market participants are more ready than others – and some “have a lot to do to meet deadlines, and our expectations”.

The FCA also stated that its work on the T+1 transition is helping support growth in the UK financial market, adding, “We’re testing how ready market participants are for the transition, and where implementation challenges and bottlenecks remain. We take a lack of readiness seriously, as it doesn’t just affect the firms in question but the wider system. We’ll follow up with them over this year, and expect their preparations to significantly improve.”

As the one-year landmark approached, Andrew Douglas, chair of the UK’s Accelerated Settlement Taskforce observed, “This milestone should be a wake-up call for any firms that are behind on preparations. Simply thinking about T+1 is no longer enough and the next 12 months need to be about firms implementing and then testing their processes to ensure they are T+1 compliant. 

“For everyone, that means understanding both their own readiness and that of their clients, counterparties and service providers,” he continues. “Fund managers especially need to address funding, FX and allocations processing whilst custodians, brokers and vendors need to ensure their clients have the information and services they require to transition successfully. 

“Firms need to know exactly where manual interventions remain in their processes, why they’re necessary and whether they fit within a T+1 timeframe, Douglas adds. “Where they don’t, and they largely won’t, firms must work to eliminate them. Failing to do this will result in higher settlement failure rates under T+1, driving higher exception-management costs, additional funding and liquidity pressures and complications around FX, as well as reputational damage. 

“The next year is therefore not simply a countdown. It should be a progression from implementation, to testing, to operating confidently within the new timetable,” he concludes.