Sibos 2023: You can’t manage what you can’t measure – the role operational data will play in the successful transition to T+1
With the Securities & Exchange Commission’s (SEC) decision to accelerate the US cash equities, corporate bonds and municipal bonds settlement cycle to T+1 in May 2024, post-trade automation has been thrust into the spotlight. Historically, automation in the back and middle office has been viewed as best practice but now its implementation has become critical in ensuring timely settlement and meeting the new T+1 requirement.
With the move to T+1, institutional trades will need to be allocated and affirmed as soon as is technologically possible and no later than 9pm ET on trade date, referred to as Same Day Affirmation (SDA). Before successfully completing the affirmation process, first, investment managers allocate trades to underlying client accounts and instruct those details to the executing brokers.
Then, once the allocation process has been completed, the broker confirms each trade by providing a detailed record of a transaction, including what was traded, the date of the trade, the cost and the net value. Finally, the transaction is affirmed by the investment manager, designated custodian, or prime broker.
By successfully completing these activities on trade-date, matched and affirmed transactions are submitted into the settlement process in time to meet the accelerated T+1 settlement timeframes and in accordance with SEC guidance on SDA.
The good news is that automated solutions enabling the timeliness of these middle office processes are already available to market participants and can be key to ensuring readiness for T+1.
Firms should consider solutions that provide them with insights into their operational performance. These solutions are already available and can provide a wealth of metrics on same day agreement, same day entry, submission time confirmation and affirmation rates against custodian cut-off times. This operational data can then be leveraged by firms to evaluate which counterparties are performing better than others, which allows them to produce score card for each counterparty’s trade process in order to identify any that might potentially be consistently operationally inefficient.
Subscribers of DTCC ITP’s CTM and/or TradeSuite ID services can now also access a T+1 Scorecard, a dynamic dashboard engineered to help analyse the level of preparedness for the implementation of T+1 in US and eventually other financial markets. The dashboard highlights relevant metrics such as, what time allocations and confirms are submitted and what time confirms are affirmed. The T+1 Scorecard metrics, industry benchmarks, and trend analysis can be a crucial part of a firm’s preparations for a T+1 settlement cycle, as well as assist with identifying areas of operational inefficiency in post-trade processes.
DTCC also recognises that many organisations may not have the resources available to interpret and act on these insights ahead of May 2024. DTCC Consulting Services can assist clients in this area and has already helped many firms to develop end to end impact assessments, manage testing programmes and conduct counterparty reviews to ensure operational efficiency.
Ultimately, as the countdown to the T+1 implementation begins, it’s imperative for firms to understand their operational performance by leveraging data. As the saying goes, you can’t manage what you can’t measure. It’s not just about compliance with the accelerated settlement timeframe; it’s also about demonstrating best in class operations which ensure efficiency, reduce costs, and enhance client satisfaction.
About the author
Valentino (Val) Wotton is managing director and general manager of DTCC’s Institutional Trade Processing (ITP), where he oversees the firm’s global middle-office trade processing solutions including ALERT, CTM and Settlement Instruction Manager. Working closely with market participants, industry organisations and his peers, Wotton focuses on growing businesses, enhancing services, and delivering increased value to international clients, enabling them to meet evolving operational and regulatory compliance demands such as the move to T+1 in the US and accelerated settlement globally.
Additionally, he is the regional administrative manager for DTCC EMEA, and chairman of the DTCC EMEA Operating Committee. In this role, he oversees employee engagement, corporate social responsibility, DTCC brand awareness and the execution of a variety of employee initiatives. He is also the executive sponsor of DTCC’s Women’s Initiative for Networking and Success (WINS) Employee Resource Group.
Prior to this role, Wotton was managing director of product development and strategy, repository and derivatives services, where he was responsible for overseeing the firm’s Global Trade Repository (GTR) service, DTCC Report Hub and Trade Information Warehouse (TIW). Within this role, he led efforts to identify opportunities to enhance services to meet the needs of the firm’s global client base while supporting DTCC’s goals and continued focus on automation, standardisation and client experience.
Before DTCC, Wotton served as global head of markets, post-trade services and Europe markets operations at Barclays, with oversight for all post-trade processing including US and internal securities settlement and asset servicing. There, he was responsible for the implementation of a strategic global operational model to provide improved post-trade service capabilities to clients and internal businesses as well as the design and delivery of an enhanced strategic architecture to achieve automation, process improvement and risk management objectives. He also was co-chair of Barclays Multigenerational Network. Previously, he held several senior roles at Citigroup.
During his career, Wotton has served on several boards and committees, including DTCC’s Deriv/SERV Board, LCH OTC Deriv Net, and the International Swaps & Derivatives Organisation’s (ISDA) Market Infrastructure & Technology Committee (MITOC). He holds a Bachelor of Law (with French) degree from Nottingham Trent University.
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