Come October next year, when a UK or European investor buys or sells a share or bond, the exchange of securities for cash will take place the very next business day, rather than two days later. One of the biggest issues with the switch is that behind every single equity and bond transaction sits a plethora of adjacent events the vast majority investors never pay attention to. 
For instance, a fund buying US shares may need to quickly find cash dollars to pay for them. A UK gilt being sold may previously have been lent and subsequently need recalling, while investment banks and brokers may have to finance inventories through the repo markets. All these events lurk in the shadows of the settlement cycle shortening known as T+1.
The trouble is that shortening the settlement cycle gives everyone less time to make sure all the right pieces are in the right place and these knock-on events run without a hitch.
Financial markets are wonderfully automated and smooth when everything goes according to plan. The interesting bit is what happens when they don’t.
A trade can be booked electronically in fractions of a second and pass through highly sophisticated market infrastructure. Yet when something goes wrong further down the chain, resolving the problem can still involve copious amounts of emails, phone calls and spreadsheets, all to try and work out which person at which financial institution actually owns the problem.
That creates an interesting paradox. T+1 reduces the period during which counterparties are exposed to each other, which should make markets safer. On the flip side, it also removes a day in which the financial system can discover and fix its mistakes.
The great T+1 technology challenge is therefore making unsuccessful trades become visible faster and get fixed faster. That changes what good market infrastructure looks like. Sure, straight through processing will remain essential, but so will what happens when a transaction falls off that straight through path.
Platforms that allow counterparties to identify, route, track and resolve exceptions collaboratively, rather than chasing them through disconnected communication channels, become increasingly important when every hour counts. The move to T+1 becomes as much about the speed of communication as the speed of settlement.
Similar to how an eclipse reveals things normally hidden by the glare, T+1 could do something remarkably by exposing the operational dependencies that have always been there, but were easier to overlook when everyone had another day to sort them out.
Europe has sensibly aligned the UK and EU transition around the same date. The next challenge is ensuring that the operational processes surrounding those securities are equally well aligned.
During today’s eclipse, our natural instinct will be to stare longingly at the thing disappearing in front of us. As the UK and Europe continues to prepare for T+1, only those looking into the shadows will be able to see and address the biggest changes coming.