FIX Trading Community launches new messaging capabilities for real-time settlement

New message types will support the acceleration of post-trade settlement cycles as the US prepares for its shift to T+1 and other regions assess whether to follow suit.

The FIX Trading Community has launched a new real-time messaging type aimed at supporting the industry in its shift to accelerated settlement cycles.

The four new message types are set to improve operational efficiency and reduce risk with real-time settlement updates.

Markets globally are at varying stages of preparation for the shift to accelerated settlement.

“The transition to T+1 in the US and the potential repercussions on markets globally have highlighted the pressing need for greater trade visibility and more efficient, speedy communication across buy-side firms, custodians and brokers – both crucial in supporting the early detection of errors and the swift resolution of issues,” said David Pearson, product manager at Torstone Technology.

“FIX’s new workflow and messaging standards will drive significant improvements to post-trade operational inefficiencies by closing the existing communication gap and enabling near real-time updates on securities settlement status for end clients.”

Read more – T+1 settlement: The biggest FX shake up in decades

The US Securities and Exchange Commission (SEC) gave the green light for the implementation of T+1 settlement in February, with a planned implementation date of 28 May 2024.

Testing began for the shift in the US on 14 August and will run until the implementation date. The period is seen as critical for an industry still struggling to comprehend the far-reaching changes which will occur once the settlement cycle is shortened for US equities.

Whether or not other markets such as Europe and the UK follow suit is yet to be seen, however, both divergent and convergent stances to the shift will force firms operating within both regions to undergo a significant operational overhaul.

One of the markets most heavily impacted is likely to be the foreign exchange markets as FX trades are typically executed after an equity trade has been matched and executed and subsequently will be under increased time pressure. If FX trades cannot be completed in the same time frame there is the potential the market could start to see more settlement fails.

The industry has subsequently seen several initiatives come to market as of late in a bid to alleviate pressure caused by the transition to shorter settlement cycles.

Earlier this week, The Depository Trust & Clearing Corporation (DTCC) revealed that 350 investment managers are now leveraging CTM’s automated trade affirmation capabilities to accelerate the post-trade lifecycle, as firms prepare for the US move to T+1 trade settlement.

The adoption of CTM’s M2i workflow – which involves subscriptions to CTM, TradeSuite ID, and SSI enrichment via ALERT – helps clients achieve T+1 settlement, as it automatically triggers trade affirmation and the delivery of instructions for DTC-eligible securities directly to the Depository Trust Company (DTC) for settlement when a trade match occurs between an investment manager and an executing broker.

«