T+1 Accelerated Settlement

UK T+1 settlement is going to happen in 2027. This is a regulatory initiative that will force firms to change to support same-day processing. This impacts speed and resilience. Batch processes and controls need to become near real-time, exceptions need to be identified and addressed quickly, and manual processes need to be automated.

Successful T+1 settlement needs, by midnight on Trade Date:​

• Settlement instructions matched​
• Cash in place – which may include a separate FX trade​
• Securities in place – which may require depot realignment or stock loan recall

All post-trade operations need to support this timeframe: client static set-up and maintenance, trade/allocation booking, confirmation, settlement instruction and matching, liquidity and cash management, etc. These depend on data: sourcing, integrity, cleanliness, and security, including cyber security. Resilience also needs to be considered. There is much less time to address issues. Where do prevention, identification, and resolution need to improve?​

A recent paper by TORI and Gresham Technologies highlighted the similarities between the post-trade operating model requirements for T+1 and the approach taken by firms with high levels of operational resilience without any regulatory restrictions. They do this to reduce costs and ensure high levels of scalability:

• To achieve high resiliency, firms need to know the details of all operational processes and data flows (Correlation, dependencies, transformation, desired result)​
• Understanding how things work at a detailed level drives automation and efficiency (reduced costs and high levels of scalability)​

This paper also identified the difficulty that firms have had in getting funding for post-trade infrastructure improvements. It is very difficult to make the business case to prove the benefits of investing to deliver timely, accurate data and automated processing, especially where there are dependencies on counterparties. The approach being taken for T+1 settlement addresses this. T+1 is a regulatory requirement which means this investment is mandatory for individual firms and the counterparties they depend on.​

TORI are actively working with firms to help them prepare for these changes. We have a deep understanding of market participants’ businesses, including their products and services, client types, front to back flows, infrastructure, 3rd party providers, and regulatory obligations. We have a long track record of providing innovative and effective solutions.​