When T+1 Happens, It’s Still Not Settled… The Story Continues

Are you prepared to navigate the long road of T+1?

With T+1 already in effect, it seems that many firms were focused on meeting the basic requirements needed for the May 28th implementation date. While most of us feel confident that we know what to expect as we navigate T+1 moving forward, there’s an element of uncertainty that everyone must be prepared for. These regulatory changes won’t automatically be a small object in our rearview mirror as we cruise down smooth open roads, we have to be ready to face the twists and turns ahead of us, even if they’re not immediately in view. 28Stone is ready to guide you along this new territory. We’re taking a closer look at what we might see moving forward, solutions that can reduce failure rates and the evolving future of T+1.

Crossing Our T’s and Dotting Our I’s 

In early 2023, when the SEC adopted the rule amendments that would shorten the settlement cycle, it seemed like a far off thought that we would all circle back to when the time got closer.  Now it’s here and some of us are feeling a heightened sense of concern.

Why is that?

Well, as much as we know about the T+2 to T+1 change, we’re also seeing some large, and in a few cases, intimidating blind spots. The basics are clear; U.S. financial institutions will now settle in one business day of their transaction date instead of two business days. With most banking and financial services conducting their business online, the need for extra days to physically deliver securities or funds is no longer necessary.  This recognition of the advancement of technology was also a driving force behind the T+3 to T+2 settlement change in 2017.

So while we’re prepared with the basic information (i.e. one business day to settle), it seems that many firms are waiting to see how the cards fall now that T+1 is in effect. There’s a lot that we don’t know. How will teams handle the pressure of a constricted timeframe in the short term as well as the long term? What will the failure rate look like and what  can we do to improve it? Are we seeing common pitfalls in the new process?

Truthfully, the answers to these questions will not be entirely known for some time. The next six months will show us where we need innovative solutions and changes as well as some unexpected opportunities we might not have been aware of beforehand.

Settling Into T+1

It’s true that many of us waited with much anticipation for the implementation date to arrive. As reported over the last few months, we’ve seen firms change workflow structures, relocate staff and adjust shifts. It would be safe to say that there have been clear traces of anxiety among firms for what might happen over the coming weeks and months.

After the first week, reports have been positive. The fail rate was relatively low and all seemed to be moving forward quite smoothly. What is more difficult to measure are the internal pressures that staff might be feeling as they work to manage a shorter settlement time.

Teams will need help navigating T+1 and all the accompanied stress in the long term. Firms will be looking for ways to ease the process and find more efficient ways to allocate responsibilities and resources. Solutions are sure to come over the next few months so understanding what works for your firm and what are currently large hurdles will help teams figure out what will be most beneficial for future workflows.

Solutions For The Future 

We may not be able to figure it all out at once or even within a few weeks, but the next six months provide us with a time to navigate through difficulties and outline opportunities. What we can be sure of is that our team at 28Stone is listening and we’re prepared. We’re identifying the challenges we can see and ready to tackle those that we cannot.

While the SEC has given us ample time to prepare for the implementation of T+1, it’s become clear that the real adjustments will come now that the deadline has passed. We might not know all the challenges we could face or the changes teams will have to make on the road ahead, but we can take steps to set ourselves up for the best outcomes possible. The way we trade is changing and we’re committed to finding a successful road forward with our peers at our side.

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