A small buy-side firm’s budget for the T+1 implementation is likely to start at $223,000, a report by Firebrand Research has revealed.
Virginie O’Shea
By analysing North America’s settlement, the report emphasised key success factors to be learned and considered for European implementation, highlighting steps such as budgets and greater post-trade automation investment to ensure success in the transition to T+1 settlement.
Additionally, the research, which was produced in collaboration with Clearstream, The Depository Trust and Clearing Corporation (DTCC) and Euroclear, pointed to the complexity of Europe’s move to T+1, as a result of higher quantities of financial market infrastructures (FMIs), regulators, markets involved across the continent.
Specifically, on average 83% of equity flow and 71% of fixed income flow from the firms interviewed goes through automated central trade matching, however issues surrounding mismatch associated with SSIs and place of settlement (PSET) require improved operational processes and automation.
The research also noted that accurate and detailed settlement data being shared at convenient and appropriate times would be important step for firms to take, to ensure a successful transition.
“While the report highlights operational issues and data inconsistencies as significant challenges, leveraging the lessons learned from other regions’ move to T+1 –particularly regarding automation and client engagement – will be instrumental in ensuring a smooth transition across European markets,” said Val Wotton, managing director and global head of equities solutions at DTCC.
“Post-trade automation has proven to be a critical enabler of T+1 settlement, significantly reducing errors and operational costs. Therefore, it is imperative that firms allocate sufficient resources and budget to invest in advanced automation systems, including technology to support central matching and standing settlement instructions.”
The research also revealed further key concerns for interviewees ahead of the move scheduled for 11 October 2027, including possible misalignment regarding foreign exchange and implementation across the UK, EU, Liechtenstein and Switzerland.
Virginie O’Shea, founder of Firebrand Research said: “The European move to T+1 is undoubtedly much more complex from a planning and implementation standpoint than the North American transition. Not only are there more currencies, market infrastructures, market participants and regulators involved, but there are also significantly different market practices to accommodate.
“However, the research also shows that valuable lessons have been learned in previous moves to shorten the settlement cycle such as the benefits of early testing and strong governance.”
The report was produced from interviews with operations and technology teams representing 45 firms from the asset management, custodian, bank and brokerage communities.