T+1: Buy-side considerations
- Connie Leung
- May 24, 2024
- 1 min read
Updated: Jan 20
Ready or not, the T+1 settlement cycle will be here! While it may not be imminent, its impact on securities finance and foreign exchange (FX) transactions will be significant in the long run. Let’s delve into some key considerations:
1. T+1 Settlement Cycle:
Starting from May 28, 2024, most broker-dealer transactions in the United States will settle within one business day (T+1).
This change affects the official transfer of securities and cash between buyers and sellers.
Market participants need to adapt swiftly to the shorter settlement time.
2. FX Transactions and Global Implications:
The move to T+1 settlement has broader effects on FX trading.
Investors trading U.S. equities from different time zones (e.g., Asia-Pacific) will face challenges due to the misalignment between T+1 for U.S. securities and the existing T+2 settlement for FX trades.
Pre-funding strategies may become necessary to align with the new settlement cycle.
3. Asset Managers and Custodians Collaboration:
The relationship between asset managers and custodians becomes even more crucial.
Efficient coordination and communication are essential to navigate the changes smoothly
Consider optimizing liquidity during peak periods, especially for Market On Close (MOC) orders in U.S. equities.
4. Operational Efficiency and Transformation:
Beyond the immediate adjustments, operational efficiency remains a long-term goal.
Firms should explore transformative solutions to streamline processes and enhance risk management.
This is just the beginning. The ongoing enhancements to market infrastructure, aimed at boosting efficiency and mitigating risk for all participants, form the enduring theme.
If you would like to discuss how technology and AI can help you with your operations, let's have a chat :
Book a time: https://meetings.hubspot.com/hkconniefong
Email: connie.leung@mg-insight.com
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