Torstone Technology, a leading SaaS platform for post-trade securities and derivatives processing and Firebrand Research, a provider of research and advisory services have published a white paper highlighting the business case for firms to address inefficiencies across the middle- and back-office and increase automation ahead of the global push towards shortening settlement cycles including T+1 and T+0.

There is a real-time digital tsunami coming to the US & Canadian financial markets with T+1 settlement https://t.co/hqnyjo0Hbt

— Mack Gill (@mackgill1) November 10, 2022

The report titled ‘The Move to T+1: A business case for automating the middle office’, emphasises the regulatory pressure to move to T+1 in North America in just under two years, and the scope of the practical challenges for firms as the industry moves to T+1.

The research estimates that 81% of brokers and banks active within the US and Canadian markets are either using manual processes or home-grown systems to support their post-trade processes. Beyond post-trade securities operations, the move to T+1 will also require changes across firms’ wider operational flow including:

• Front office systems
• ETFs and mutual fund processing
• Corporate actions
• Reference data
• Trade confirmation systems

The report goes on to outline a number of key operational benefits that can result from strategic investment in post-trade processes. These include:

• Increased confirmation matching rates, faster exception resolution and reduction in settlement failures which ensure greater operational efficiency
• The ability to deal with higher volumes of electronic order flow and market volatility
• Providing greater operational resilience
• Focusing operations staff on more value additive, client-facing tasks
• Coping with market changes without increasing the number of operations staff
• Modernising in line with the era of cloud

Commenting on the report, Brian Collings, CEO, Torstone Technology, said, “As the move to T+1 gathers momentum, firms will find that failing to adapt to industry-driven market structure changes will incur significant risk both operationally and competitively in a challenging market. Manual processes and batch processing are simply not compatible with the shift to shorter settlement cycles – firms need to update and automate their middle- and back-office systems or face substantial operational risk.”

Virginie O’Shea, CEO & Founder of Firebrand Research, added: “While firms absolutely need to prepare for the move to T+1, greater automation and digitisation has been topping client agendas since the pandemic and the subsequent pressure on resources. While T+1 is a clear impetus for firms to address inefficiencies, the benefit further automation will bring to competitiveness and client service cannot be overstated.”

Source: Torstone Technology