Investment Operations

UPGRADING MIDDLE AND BACK-OFFICE PROCESSES NECESSARY FOR MOVE TO T+1 SETTLEMENT

Buyside Operations

Post-Trade platform provider Torstone Technology and Firebrand Research have published a white paper highlighting the business case for firms to address inefficiencies across the middle and back-office and increase automation ahead of the global push towards shortening settlement cycles including T+1 and T+0.

The report titled The Move to T+1: A business case for automating the middle office, emphasizes the regulatory pressure to move to T+1 in North America in just under two years, and the scope of the practical challenges for firms as the industry moves to T+1.

The research estimates that 81% of brokers and banks active within the US and Canadian markets are either using manual processes or home-grown systems to support their post-trade processes. Beyond post-trade securities operations, the move to T+1 will also require changes across firms’ wider operational flow including:

  • Front office systems
  • ETFs and mutual fund processing
  • Corporate actions
  • Reference data
  • Trade confirmation systems

According to Brian Collings, CEO of Torstone Technology, as the move to T+1 gathers momentum, firms will find that failing to adapt to industry-driven market structure changes will incur significant risk both operationally and competitively in a challenging market. “Manual processes and batch processing are simply not compatible with the shift to shorter settlement cycles – firms need to update and automate their middle- and back-office systems or face substantial operational risk,” said Collings.

The report goes on to outline a number of key operational benefits that can result from strategic investment in post-trade processes. These include:

  • Increased confirmation matching rates, faster exception resolution and reduction in settlement failures which ensure greater operational efficiency
  • The ability to deal with higher volumes of electronic order flow and market volatility
  • Providing greater operational resilience
  • Focusing operations staff on more value-additive, client-facing tasks
  • Coping with market changes without increasing the number of operations staff
  • Modernizing in line with the era of cloud

“While firms absolutely need to prepare for the move to T+1, greater automation and digitization has been topping client agendas since the pandemic and the subsequent pressure on resources,” said Virginie O’Shea, CEO & Founder of Firebrand Research. “While T+1 is a clear impetus for firms to address inefficiencies, the further benefit automation will bring to competitiveness and client service cannot be overstated,” added O’Shea.

To download a copy of the report click here.