T+1 and new opportunities
But T+1 is not all about cost and risk downsides….
Creating a trade-date processing model
For many, T+1 presents an opportunity to forge a new, optimised operating model that facilitates trade-date processing through end-to-end automation. Leveraging SSI libraries (such as DTCC’s ALERT database), messaging platforms (such as Broadridge’s NYFIX Matching, DTCC’s CTM solution and Swift’s Unique Transaction Identifier) and new back office processing capabilities (such as Broadridge’s post trade platforms), many Asian brokers and investors can leverage the compelling event of T+1 to remove time, risk and cost from their North American trading activities.
“The funding side should all be scalable with a good global custodian – but they have to have service staff in Asia who know what is going on.”
Deeper cooperation with providers
This optimisation also extends to deepened relationships with key service providers – especially custodians. With many universal banks capable of managing FX trading, equities trading, cash funding, custody and securities lending within a single solution, there are obvious benefits for Asian investors in leveraging these connected platforms in order to remove potential weak points in the communications chain and hence reduce risk.
For those looking to these ‘integrated solutions’, two points stand out. First is to make sure that all contractual documentation (including GMSLAs, etc.) are in place well ahead of the May 2024 transition. Second is to ensure that the underlying service model of the custodian is suitably empowered: the people and the platforms must be available in Asia to communicate and action customer issues in North America.
Commercial opportunities for those able to manage risk
For those with the operational capabilities and balance sheets to lead the market, the transition to T+1 represents a strong commercial opportunity. Brokers can easily either warehouse client trades or issue structured notes in order to ‘manufacture’ a T+2 settlement cycle for Asian investors when the need arises – thereby protecting end-clients from all of the effects of this transition. Equally, those with seamlessly integrated, real-time platforms will be able to accelerate their lending and trading at a time when others may be hesitant – creating opportunities to grow market share.
“By issuing a note that settles on T+2 we can help Asian investors to manage their settlement risks from day 1”
