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Solutions to address accelerating the securities settlement cycle
Reimagining financial services industry operations and technology for T+1
As the industry prepares to move from the current two-day (T+2) settlement cycle to a one-day (T+1) settlement cycle, what will the impacts be for the market infrastructure and various market participants? And what will this mean for operations, risk management functions, and the role of emerging or novel technologies?
T+1 may feel like it’s coming too soon for widespread adoption of true digital technological improvements to existing operational processes. Rather than viewing it as a growth opportunity, it has instead been regarded as an operational and regulatory burden by market participants. The next step in the post-trade modernization journey should not automatically be T+0 — it’s time for markets to take steps toward dynamic settlement for their customers, and leverage technology as a key strategic differentiator.
In collaboration with our alliances, Digital Asset and AccessFintech, this report provides a distinctive, unique lens into the next generation of operations within the US financial services industry in which human capital concerns and settlement timelines are a thing of the past.
Accelerating the securities settlement cycle
Currently, securities settlement involves a series of mostly manual processes that are prone to risk, high costs, and operational stress. But as the industry considers moving to T+1, there are a number of potential benefits that should help strengthen the resiliency of financial markets, reduce risk, and create cost savings for firms and their investors.
The SEC has proposed March 31, 2024, as the compliance date for the T+1 transition. As the move toward an accelerated settlement cycle gains momentum, numerous market participants, including broker-dealers, investment managers, and industry utilities and vendors, are working in close collaboration to study the feasibility and impacts of this industry transition.
While the transition to T+2 settlement was viewed as “tightening the belt” for many operational processes, many consider the transition to T+1 to require significant reengineering of market and business functions, including the advent of advanced technologies.
The journey to T+1
- September 2023 – Accelerating to T+1 - Client Stratification Model
- September 2023 – T+1 Testing Readiness
- September 2023 – T+1 Policy and Procedures
- July 2023 – Are you T+1 ready?
- June 2023 – The Network Effect Podcast with AccessFintech
- May 2023 – Developing a Comprehensive, End-to-End Testing Strategy for the T+1 Accelerated Settlement Cycle
- February 2023 – Accelerated Settlement Cycle Placemat
- February 2023 – Accelerated Settlement final rule is announced by the Securities and Exchange Commission
- November 2022 – Accelerating the settlement cycle: An opportunity to modernize across the industry
- August 2022 – T+1 Securities Settlement Industry Implementation Playbook
- August 2022 – SIFMA, ICI and DTCC Publish T+1 Implementation Playbook as the Industry Readies for Accelerated Settlement
- February 2022 – SEC adopts proposal to move securities settlement to T+1 Paper
- February 2022 – SEC proposes new rules for shortening the securities settlement cycle to T+1
- December 2021 – Accelerating the US securities settlement cycle to T+1
- May 2021 – Accelerating the settlement cycle: An opportunity to modernize the industry
- April 2021 – SIFMA, ICI, and DTCC leading effort to shorten US securities settlement cycle to T+1, collaborating with the industry on next steps
Deloitte can help you prepare for a T+1 settlement cycle
There are several considerations that firms can address to prepare for an accelerated settlement cycle, and substantial changes to business practices and supporting technology will be necessary to meet the reduced settlement period.
T+1 impact analysis
Current-state assessment
PMO support
Develop business requirements
Design and execute testing
Go-live preparation and execution
● Conduct a current-state impact assessment to identify potential enhancements or changes to people, process, technology, and data architecture.
● Evaluate impacts to front-, middle-, and back-office operational and functional areas across in-scope asset classes.
● Identify enhancement opportunities to address operational pain points and enable continuous improvement.
● Develop current-state process maps and technology infrastructure diagrams to accelerate a firm’s understanding of the impact of T+1.
● Conduct interviews and process walkthroughs with relevant stakeholders across in-scope functional areas.
● Evaluate current-state processes and systems with respect to known T+1 changes, and identify gaps to be remediated prior to go-live implementation.
● Document gaps across in-scope functional areas with respect to operational and technical capabilities needed for future-state requirements.
● Support the stand-up and operation of a central project management office to manage the T+1 transition, including development of program plans, workstream charters, and resourcing plans.
● Establish governance procedures to drive accountability and implement consistent management across program relative to other in-flight firm initiatives.
● Provide ongoing tracking and reporting to enable continued execution of T+1 migration activities.
● Identify and document business and technical requirements that are needed or desired for a future-state T+1 settlement operating model.
● Prioritize and sequence business requirements based on business priorities/initiatives.
● Engage applicable stakeholders for review and alignment of identified requirements.
● Develop future-state requirements for operational and technical needs across select focus areas.
● Develop a testing plan to execute the various stages of testing required for the migration to T+1 settlement.
● Initiate capabilities build, execution tracking, reporting, and testing.
● Conduct go-live testing, issue resolution, and support business-as-usual transition.
● Identify Day 1 readiness activities for a migration to T+1, including the development and execution of the business-as-usual runbook.
● Provide training and resources to support the change management initiatives necessary for an efficient transition.
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