Last year, DTCC played a pivotal role in guiding the North American financial industry through the complex transition to T+1 settlement, mobilizing firms to test and update their systems for a seamless conversion. This major initiative was executed alongside significant progress on other strategic priorities, including U.S. Treasury clearing, global derivative rule refits, and the advancement of digital asset infrastructure through the newly established DTCC Digital Assets business.

For Frank La Salla, President, Director and Chief Executive Officer of DTCC, it was the “Year of Execution”. In an interview with Traders Magazine, La Salla reflects on the most significant challenges of executing a T+1 initiative and the lessons that global markets can draw from the experience. He also shares insights into how firms can drive effective transformation, responsibly adopt emerging technologies like AI and blockchain, and navigate regulatory complexity while staying focused on capital efficiency and talent development in an increasingly dynamic environment.

What were the biggest challenges in the T+1 transition, and what lessons can global markets draw from the experience?

In large scale initiatives such as T+1, and now the expansion of U.S. Treasury clearing, the biggest challenge is anticipating unpredictable events that can disrupt the financial markets and company operations as firms work toward implementation and compliance. That’s why rigorous and coordinated planning, testing and information-sharing are critical in preparing for successful transitions and proactively addressing potential issues if they were to occur.

The industry relies on DTCC for our risk management and resilience capabilities, which were built into every component of our T+1 Playbook as we planned for different types of disruptive scenarios and their remediation. We also coordinated client tabletop exercises that helped us understand our clients’ challenges, as well as ours, and how we could strengthen our incident response and communications. The T+1 conversion was a success thanks to these efforts and the collaboration across the industry, led by SIFMA, the Investment Company Institute and DTCC. We’re already sharing our experience and key learnings with markets in the UK, Europe and Asia as they plan their accelerated settlement journeys.

With modernization as a top priority across financial services, what does effective transformation look like today?

Effective transformation begins with innovation, whether it’s tech-enabled or otherwise, by applying critical thinking and problem-solving. Across financial services, firms, including DTCC, have been upgrading their systems and applications with digitization, automation and new technologies. These enhancements will help them to scale processes and remove friction from workflows to simplify and elevate the client experience.

At the same time, our industry is held to the highest regulatory standards, and while we can be innovative and use transformative technologies in impactful ways, we must ensure that our approach and implementations are thoughtful and protect market soundness and stability. Not only is it important for modernization programs to have strong risk governance and resiliency frameworks, but it’s also essential that firms engage their clients for input on how to continuously improve their solutions and services. As a strategic partner to the industry, DTCC is committed to taking our clients’ recommendations and incorporating them into our offerings to increase the value that we deliver.

How should financial institutions be thinking about integrating cloud, AI, and blockchain into their core operations?

Al, blockchain and cloud are innovative technologies that have the power to transform every aspect of a company’s business and organization, which is why responsible oversight, adoption and utilization is paramount. At DTCC, we’ve established an internal AI Council and AI Enablement Team to provide governance over our AI program and evaluate potential use cases to ensure that we’re onboarding and implementing the technology in a secure and productive manner.

In addition, blockchain and cloud technologies will play increasingly crucial roles in the build out and interconnectedness of the digital financial ecosystem. As regulatory clarity for deploying these technologies grows, firms need to evaluate their technology architecture and capabilities using a risk- and resiliency-based lens. This will help to ensure safety and soundness while promoting financial innovation and new benefits for market participants.

Regulatory divergence remains a challenge globally, especially in areas like derivatives reporting. What can firms do to stay compliant while managing complexity?

The derivative rule refits, which have been occurring in multiple jurisdictions around the world, are a good example of how industry collaboration and engagement has helped firms stay compliant while navigating through significant change. Testing, especially early testing, helped many firms identify issues ahead of time and better position themselves to meet future delivery dates under the new rules. DTCC has continued to advocate on behalf of the industry when further clarity is needed, and we’ve been proponents for more harmonization, data quality and data sharing. We’ve hosted forums where stakeholders could exchange information, best practices and feedback from regulators. Aligning the industry around consistent standards, procedures and frameworks has been effective in achieving compliance with increasingly complex regulatory requirements.

With capital efficiency top of mind, what innovations are helping firms unlock liquidity and optimize collateral usage?

There are many things that market infrastructures can do in this area, and we’ve placed a high emphasis on this at our firm. Let me give you one example of where we can make an impact. The SEC’s U.S. Treasury clearing mandate has reconfirmed the industry’s high demand for capital and liquidity optimization as firms seek greater balance sheet relief. Cross-margining, for example, provides the opportunity for capital efficiency gains and margin savings, and at DTCC we’ve seen success through our enhanced cross-margining arrangement with CME, which we launched in early 2024. We recently announced plans to expand this solution to eligible end users by December 2025, subject to regulatory approval. This would allow end users to access available capital efficiencies when trading U.S. Treasury securities and CME Group interest rate futures that have offsetting risk exposures.

Finally, as we look ahead, how can firms cultivate the leadership and talent needed to drive innovation and transformation?

The accelerating pace of change in today’s operating environment requires a new leadership mindset and capabilities to achieve organizational goals and exceed client expectations. Within any organization, it’s important to define what “great” leadership looks like as well as enterprise leadership behaviors that will drive purposeful innovation, strategic change and responsible growth. It’s equally important to provide learning and development opportunities to support colleagues in building their leadership skills, institutional knowledge, technology expertise and ability to communicate effectively. Rewarding maximum achievement with advancement opportunities can help companies deepen their talent bench and build the next generation of enterprise leaders.