T+1 ‘Only’ a Decade Away
U.S. markets likely will shorten its trade-settlement window to the day after trade date by 2026, according to 78% of respondents to a recent survey conducted by financial software and services vendor SS&C.
“This is probably true as technology advances,” said Bob Moitoso, senior vice president and general manager, financial markets at SS&C Technologies. “You naturally would see a quick progression from T+2 to T+1. I would also argue that if you have to go to T+1, then T+0 would happen too, given the same advancements in technology.”
SS&C surveyed 50 executives from companies with more than 500 employees during the International Securities Association for Institutional Trade Communication’s annual Boston conference in mid-March.
Of those surveyed, 50% were from buy-side firms, 38% were from custodians, and 12% were from sell-side firms.
Looking towards the looming deadline to migrate to a T+2 settlement window, the majority of respondents stated that the would be well prepared technologically and operationally, 66% and 72% respectively, for the expected switch over slated for the mid-third quarter of 2017.
“If you think about it, this isn’t new to us,” said Moitoso. “Europe has been doing this for a while. One could argue that many systems that are out there already can support T+2 settlement.”
The greatest difference between the buy side, sell side, and custodial banks, however, is how much each plans budget and prioritize their IT investments in preparation for T+2.
Approximately 60% of the buy-side respondents do not plan to increase their IT budgets at all while 50% of all respondents stated that they have or will increase their budgets.
“Frankly, buy-side firms are probably going to rely on their vendors to take of this whether it is their order management system or some of their back office systems,” said Moitoso. “For the buy-side firms that have their own systems and built their own technology, they are going to have to figure this out on their own.”
Meanwhile, nearly half of the custodians, 47%, indicated that they have or will prioritize their investments into new technologies like blockchain compared to a large amount of sell-side respondents who plan to leverage existing technologies like the FIX messaging protocol.
“These buy- and sell-side firms have spent heavily on their front-office infrastructure over the past 10 to 15 years,” noted Moitoso. “It would make sense for them to utilize and leverage their investments in technologies like FIX into their middle- and back-office operations.”
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