10.06.2014
By Terry Flanagan

Buyside Focuses on Confirmations As T+2 Begins

The buyside has been focussed on making its processes to confirm trades more efficient as the settlement cycle becomes shorter in the European Union according to Broadridge Financial Solutions.

Robert Harris, business product manager, global technology and operations solutions, at Broadridge told Markets Media in an email there has more recent interest from the buyside in speeding up the confirmation of trades and identifying differences. On October 6 Europe shortened its settlement cycle for securities by one day to T+2.

“Some are more enthusiastic than others, but they are increasingly conscious of the increasingly complex regulatory environment they now find themselves in,” Harris said. “Given time, we envisage this will be the new ‘norm’ for multi-asset trade confirmation matching and reconciliation where the benefits of overall efficiency outweigh the challenge of process change.”

A survey of more than 400 financial services executives by Broadridge found that 67% of respondents cited either new regulation and governance requirements or changes in market and industry structure as the primary forces driving business transformation, and 77% of firms are evolving their business models in response to those changes.

Last month Broadridge updated its Proactive platform for reconciliation and process management which eliminates paper-based communications for foreign exchange and non-deliverable forward trade confirmations. Sellside confirmations received on Swift are published on the internet allowing buyside access through a website.

Broadridge estimated that between 10% and 15% of foreign exchange and non-deliverable forwards are confirmed using paper, with some regional variations.

Chris Smith, head of post trade and Camille McKelvey, commercial manager, at Trax, the trade matching and reporting services technology provider, said in a statement that dealers are embracing T+2 while some investment firms managing global funds may have challenges in fully migrating to the shorter settlement period.

“This could lead to a smoother migration in the interdealer market than the institutional market, added Trax. “Dealers will need to think about whom their clients are and to what extent they need to support non-standard settlement dates.”

Trax recommended that counterparties should match transaction details, including place of settlement, in less than 15 minutes of a deal being executed.

The firm suggested that the repo market is likely to help cover the additional funding requirements when one party is buying on a T+2 basis and the counterparty is selling on T+3, but it it unclear who will bear this cost.

“Although the answer to that question remains to be seen, it’s clear that repos have the potential to become even more important in the market to ensure that cash positions are properly funded and stock lending / borrowing is likely to increase as firms search for assets to meet disconnected delivery timeframes,” added Trax.

Featured image via Xuejun li/Dollar Photo Club

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