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Accelerating to T+1: Impact on Securities Lending, Prime Brokers & ETFs and Broader Industry Readiness

By DTCC Connection Staff | 5 minute read | June 15, 2022

The U.S. Securities and Exchange Commission (SEC) recently proposed rule changes to accelerate the settlement cycle to T+1. If the rule changes are adopted, a T+1 cycle for U.S. equities transactions could be implemented in 2024.

To help firms plan and prepare for the move to a T+1 Settlement Cycle, DTCC has launched a series of virtual forums 帮助客户和行业了解T+1结算周期对特定DTCC流程的一些潜在影响.

Related: Discover More from the Accelerating to T+1 Series


The last installment of DTCC’s five-part “Accelerating to T+1” series, held on June 14, kicked off with an explanation of the impact moving to T+1 will have on securities lending, prime brokers and exchange-traded funds (ETFs) with Robert Cavallo, DTCC Director, Clearance and Settlement Product Management and Bill Kapogiannis, DTCC Executive Director, Equities Clearing Services. 最后,由行业专家组成的小组讨论讨论了他们的总体准备情况以及他们的公司是如何做好准备的.

Below are highlights from the event:

Prime Brokers Transactions
这些交易的确认截止时间从目前的SD-1截止时间上午11:30调整到晚上9点. 所有经T截止时间晚上9点确认并符合NSCCs CNS资格标准的主要经纪人交易,将由ITP发送给NSCC,通过NSCCs的CNS服务进行处理.

Disaffirmation Process
Today a PB can disaffirm for an account and its transactions up to 5PM on SD-1, 随着转移到T1SC,解除确认时间将在下午5点改变为T+1,这将仍然允许PBs需要的时间来解除交易.

How the disaffirmation process will work:

  • 在T月1日下午9时至T+1日下午1时30分之间作出否定,将导致当日结算产生逆转交易. If the original PB transaction is unsettled, the disaffirmation will net against the original transaction. If the original PB transaction is settled, the disaffirmation will result in new NSCC positions to be settled. 这两种情况都可能影响PB和EB NSCC的日内保证金要求,并可能导致日内追加保证金.
  • Disaffirmations between 1:31PM on T+1 to 5:00PM. would result in reversal transactions being generated for the next day settlement day (S+1). Similar to above, if the original PB transaction is unsettled, the disaffirmation will net against the original transaction. If the original PB transaction is settled, the disaffirmation will result in new NSCC positions to be settled. Both scenarios will impact both the PB and EB settlement day +1 NSCC margin requirement.

Optional Service
DTCC正在讨论增加一项可选服务,参与者可以选择将其未确认的机构和机构经纪人交易连同已确认的非PB交易一起从ITP发送给DTC,通过DTCs ID ANE流程进行处理. These transactions will be subject to the same authorization and exemption cutoff of 10:45PM on T. DTCC正在等待SEC对其规则提案的进一步指导,需要在今天结束前得到确认,以及这对行业和DTCC意味着什么,然后推荐正规买球平台将对这项服务的发展做出最终决定.

Securities Lending: Addressing Potential Issues
Modifications to processes, technology and behaviors will be necessary to avoid an increase in potential settlement fails. 行业工作组建议改变目前的召回行业最佳实践召回时间,以适应T+1和解周期的变化,以避免和解失败的潜在增加. In addition, 公司和他们的服务提供者应该考虑可以做出哪些改变来改进他们的合同比较和公司行动过程.

SFT Clearing
NSCC刚刚推出了一项新的服务,称为NSCC证券融资服务或简称SFT,这可能是一个有价值的工具,以解决T1 SL IWG在股票贷款领域提出的一些担忧. Here a few of the benefits of participating in this service and the benefits to firms in a T+1 settlement cycle:

The Securities Financing Transaction (SFT) Clearing service, 是美国国家证券结算公司(NSCC)的正规的买球赛平台,为权益证券(统称“SFTs”)的隔夜借款和贷款提供中央清算和结算服务。. To this end, the SFT Clearing service was just launched this month and it:

  • Supports central clearing of clients’ equity SFTs intermediated by Sponsoring Members or Agent Clearing Members.
  • Supports central clearing of equity SFTs between NSCC full-service members submitted by Matched Trade Submitters.
  • 通过为市场参与者引入更多的会员资格和清算交易机会,最大化资本效率和降低系统性风险.
  • 支持匹配的召回流程,在该流程中,通过建议的晚上9点最佳实践截止时间将召回信息传递给贷款人和借款人.
  • Supports Buy-IN processing.
  • Eliminates Contract Compare Breaks since all transactions in the service are matched transactions on a daily basis.
  • 消除月末返利利息减免,因为所有的交易都是匹配的,一天的交易因此返利的钱是每天结算的.
  • Supports Corporate Action Processing for Mandatory Events as we do for our NSCC CNS service.

这项服务为参与者提供了很多机会,他们利用它来减少当前存在的问题,因为它们只会在T1世界中成为更多的挑战.

ETF Challenges
Batch Cycle Processing: DTCC is working to expediate their end-of-day pricing process; and will be transforming the ETF application from batch to real-time processing system. This expansion will allow for the acceptance of real-time Create & redeem activity and the reporting to clients in real-time.

Global Misalignment: 由于全球有许多T+2结算周期,因此需要更早地提交抵押品,以保护资金不受违约情况的影响. DTCC is looking at opportunities to expand its collateral management process for global activity for US-listed ETFs.

ETF股票和基础全球组件之间的结算时间框架不一致,将要求授权参与者(APs)在今天之前提交抵押品,以确保本基金免受任何违约情况的影响.

由证券业和金融市场正规的买球赛平台(SIFMA)担任主席的一个指导委员会一直在与美国证券交易委员会(SEC)起草一份提案,要求对结算时间框架不一致造成的额外抵押品要求进行资产负债表/资本减免.

DTCC还在探索扩大其专门为固定收益和非担保证券开发的抵押品管理流程的机会,以及如何利用该流程进一步简化全球组件的抵押品交换.

Overall Readiness on the Road to T+1
From custodians to dealers to asset managers, the move to T+1 will impact the entire industry. In the final part of the session, experts from across the ecosystem shared their insights about the move to T+1. David Kirby, DTCC Head of Americas Relationship Management joined Mark Austin, Head of Trade Support, Connor, Clark & Lunn Financial Group, Joe Barkley, Senior Vice President, Operations, Raymond James & Associates, Gloria Lio, Head of Global Securities Operations, BNY Mellon and Kieran Mullaley, Head of Delivery, DTCC Consulting Services, to discuss the road to T+1.

Benefits of T+1

  • The move will drive overall market efficiency, allowing firms the opportunity to make changes and upgrades and reduce manual processes.
  • By lowering the margin requirements between counterparties, firms receive the benefit of a reduction of capital.
  • 推动更多的数字化解决方案和直通式处理将提高运营效率,并利用实时通信渠道.

However, while sell-side participants benefit from capital reduction, one participant noted that the impact on the asset management community is limited, because friction and complexity could be introduced.

Global Interconnectedness
The move to T+1 is being planned simultaneously with Canada. To align with a three-day holiday weekend in both the U.S. and Canada, SIFMA has requested to the SEC that the move happen over Labor Day weekend 2024. At the moment, other jurisdictions are not planning to move to a shorter settlement cycle.

A misalignment of settlement cycles between the U.S. and Europe or elsewhere will have its unique challenges, especially given the time difference and differing settlement cycle. This may cause fund or index managers to have money out of the market for a full day and present other risks.

In managing exceptions, 工作流工具可以提供实时通信,这对于缩短时间窗口来说是无价的. 适当的常备结算指示可确保交易开始时所发出及接收的资料正确无误.

A Driver for Change
The move will require behavioral changes as much as technological advancement. For many firms, 这就需要在下午5点以后改变工作时间,或者让他们利用他们的全球足迹来调整压缩的时间窗口. Other firms will need to drastically reduce or eliminate their manual processes. All firms will need to evaluate their processes and make changes and the panel agreed the time for that evaluation is now.

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