FLASH FRIDAY is a weekly content series looking at the past, present and future of capital markets trading and technology. FLASH FRIDAY is sponsored by Instinet, a Nomura company.
The Flash Friday content series on Traders Magazine covers all kinds of topics germane to trading and technology in capital markets, but perhaps no topic lends itself to the concept as neatly as settlement.
That’s because Flash Friday is meant to be about the past, present and future. Settlement is not only an evolving industry story, but settlement itself is about the dimension of time. Does that qualify as meta?
At any rate, when the industrious Traders Magazine staff sat in on the Streamlining Trades: Reviewing T+1 Processing in Financial Markets panel at the FIX Americas Trading Conference 2024 in New York on October 16, we knew it was a go for this week’s Flash.
Panelists were in broad agreement that the US’s move from T+2 to T+1 settlement for stocks and corporate bonds, which went into effect on May 28, 2024, was a great success. In fact, it went surprisingly well – speakers noted that the settlement panel at last year’s FIX conference expressed some reservations that the first few months of T+1 would be rocky, with issues to iron out regarding trade failures and affirmations.
But that rough patch didn’t happen, as aside from a few isolated issues, T+1 has been smooth sailing. Core objectives of lowering marketplace risk and reducing funding costs for market participants have been achieved, and the whole multi-year process of planning and executing the move was an example of the industry and regulators working well together.
The panel noted that one helpful aspect to the move to T+1 was the clarity provided by the US Securities and Exchange Commission setting an implementation date and sticking to it, unlike previous settlement compactions which sometimes had dates pushed back.
With regard to challenges of the T+1 landscape, panelists cited ongoing coordination with European and Asian markets, which are mostly T+2, as well as a shorter window for trade corrections.
Going forward, panelists said there is still a need for more automation and operational efficiency in post trade, which would come more easily with uniform settlement across markets.
The panel ended by touching on the idea of T+0 settlement, which is currently happening in China and India. But the vibe for going same-day was mostly bemusement, as if someone who just finished a half marathon was asked about running a marathon.
“I’ll be long gone from the industry” before T+0 happens, one panelist said. Another said simply: “not now.”
