The SEC made headlines earlier this year when it announced that it would be mandating that most securities trades in the US would have to settle the day after they execute[1]. This mandate is referred to in industry parlance as T+1.
If the mandate is not delayed, T+1 will become effective in the US on Tuesday, May 28, 2024, following the three-day Memorial Day weekend. Canadian markets are expected to migrate at the same time. However, investment firms should prepare and act as if the mandate will be finalized in 2024 as this transition will be more complex than previous settlement date mandates, most recently T+3 to T+2.
To help our investment management clients navigate this mandate, we have compiled a T+1 Guide for Asset and Wealth Managers.
Event schedule to be aware of as you prepare for T+1:
- 6:00 PM ET: Brokers are committed to delivering trade confirmation data to the DTCC by 6:00 PM ET on the trading day
- 7:00 PM ET: Firms that rely on custodians to settle trades on their behalf, are expected to deliver trade data to their custodians by 7:00 PM ET on the trade date
- 9:00 PM ET: Next-day settlement requires all trades to affirm by 9:00 PM Eastern time on the day of the trade (T)
The operational implications of these tighter deadlines may require firms to adjust their working schedule, prioritizing sending allocations to their brokers as soon as they can. Otherwise, brokers will be deluged with trades from all their clients and will be stressed to meet their confirmation deadline. Firms that manage their own affirmations will need to affirm by 9 PM ET.
In addition, not everyone on the trading team will be able to go home at the end of trading. Some employees may need to be available after hours to monitor post-trade activity and resolve breaks. Trading operations teams may have to elect to stagger shifts to ensure people are available to research discrepancies for the evening.
The role of technology & services providers
Technology will play a critical role in a firm’s ability to meet this new requirement outlined by the SEC. Firms with an efficient, straight-through processing model and electronic connectivity to a post-trade communication network are at a significant advantage to their peers. As firms that email or fax their trade allocations to brokers and custodians will need to reevaluate their operational processes. It’s a good time for firms to evaluate FIX allocation network connectivity or integration with the DTCC’s automated CTM trade matching platform.
If your firm uses SS&C Advent’s Axys platform, Advent Portfolio Exchange (APX), or Moxy OMS, be on the lookout for specific instructions for reconfiguring those systems from T+2 to T+1. For Advent Managed Services clients, stay tuned for changes the team will make to your platform and what that means for your firm moving forward.
In the meantime, download our T+1 Guide for more details on the new settlement requirements and how they will affect your business. Stay ahead of the curve by talking to your counterparties and service providers now, as there is a good chance that this mandate will take place in less than a year. For more information about our solutions and services for asset and wealth managers, contact us or request a demo.
[1] Press Release, “SEC Finalizes Rules to Reduce Risk in Clearance and Settlement,” February 15, 2023. www.sec.gov/news/press-release/2023-29
