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It’s important to realise that successful transformation must be driven by data collaboration. Therefore all parties involved in the process, such as market participants and regulators, need to share and exchange data effectively. One significant trend in the financial markets is the move towards real-time pre-matching. Pre-matching refers to the process of matching trade details and ensuring that they are accurate before the settlement date. As a result of conducting this process in real time, the time and effort required for issue detection and resolution can be significantly reduced.
By adopting real-time pre-matching and enhancing data collaboration, AccessFintech’s Synergy network can pave the way for a successful acceleration of the T+1 settlement cycle in any region and bring about positive changes in the financial industry.
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T+1 settlement regulations are soon to be implemented in the United States, the United Kingdom and Europe. These regulations aim to streamline and improve the settlement process by reducing the time it takes for trades to be settled.
AccessFintech’s Synergy network offer a solution that enhances the T+1 settlement workflow. By providing more real-time information from agents and Central Securities Depositories (CSDs), Synergy enables pre-matching and facilitates a smoother transition to the incoming settlement regime. This means that trades can be settled more quickly and efficiently, reducing the risk of errors and delays.
One of the key ways in which Synergy improves the T+1 settlement workflow is by accelerating data visibility on T+0 settlement. Traditionally, settlement information has been delayed, causing challenges for market participants who rely on timely and accurate data. However, with Synergy’s solution, real-time local markets information is seamlessly integrated into the platform. This means that participants can access up-to-date information on trades and settlement processes, enabling them to make more informed decisions and take proactive steps to resolve any issues that may arise.
Synergy’s solution for T+1 settlement regulations offers significant benefits to market participants. By incorporating real-time information from agents and CSDs and enabling pre-matching, Synergy prevents potential discrepancies or errors that can be identified and resolved ahead of time, minimising the risk of failed settlements. This not only improves efficiency but also reduces the likelihood of costly disputes and the need for manual intervention.
As T+1 settlement regulations come into force in the US, UK and Europe, Synergy’s participants can confidently navigate the changing landscape, knowing they have access to the tools and information necessary for successful and timely settlement of trades.
AccessFintech’s Synergy T+1 settlement solution is designed to enhance the T+1 settlement workflow
Full lifecycle data transparency accelerates T+1 settlement by providing real-time visibility, mitigating risks, and enabling efficient reconciliation. It ensures compliance, facilitates timely issue resolution, and enhances operational efficiency, fostering a reliable and transparent financial ecosystem.
Transaction pairing and enhanced pre-matching streamlines T+1 settlement by aligning trade details early. This proactive approach reduces discrepancies, minimizes operational risks, and ensures a smooth settlement process, contributing to the efficiency and reliability of financial transactions.
Real-time fails prediction and prevention enhances T+1 settlement by identifying potential issues before they impact the process. This proactive approach minimizes settlement failures, reducing risks and ensuring a reliable and efficient financial transaction lifecycle.
Cross-market data collaboration optimizes T+1 settlement by fostering information exchange among market participants. This collaboration enhances transparency, reduces errors, and streamlines reconciliation, contributing to a seamless and efficient financial transaction lifecycle.
Workflow collaboration is integral to T+1 settlement, promoting seamless coordination among participants. This collaborative approach streamlines processes, enhances communication, and reduces settlement risks, ensuring a swift and efficient financial transaction lifecycle.
Data insights drive T+1 settlement efficiency by offering valuable analytics. These insights aid in risk assessment, error identification, and process optimization, contributing to informed decision-making and a reliable financial transaction lifecycle.
Maximise STP rates
Adopt efficient exception management through the trade lifecycle
Collaborate with counterparts, clients and service providers
Reinforce effective pre-matching processes
Recognise and resolve the root causes of mismatches and fails
Reduced fails
Meet a shorter settlement window
Reduce manual effort
Without Synergy, organizations face a labor-intensive process with heavy reliance on emails and manual efforts, leading to an unsustainable 95% settlement rate. With Synergy, automated investigations and data-driven workflows streamline operations, enhancing transparency and enabling proactive resolution of issues.
The market is benefitting from AccessFintech’s Securities solution, which seamlessly supports organisations in meeting the challenges arising from an accelerated T+1 settlement cycle. AccessFintech’s Securities solution ensures data transparency and collaboration through all securities transactions lifecycle, offering transaction data pairing to support enhanced pre-matching and reduce fail rates.
The introduction of a T+1 settlement cycle refers to the shortened time period between a trade execution and the settlement of the transaction. This T+1 settlement concept is now partially live in India, where market participants are able to settle their trades one business day after the trade has been executed, adhering to the T+1 settlement framework.
This shift from the previous T+2 settlement cycle, where trades were settled two business days after execution, aims to enhance the efficiency and effectiveness of the securities market through the T+1 settlement change. The idea of implementing a T+1 settlement cycle is also actively being considered for the United States, with an estimated timeline of implementation set for around 2024.
Discussions and evaluations are currently underway to assess the feasibility and potential benefits of transitioning to a T+1 settlement cycle. This proposed T+1 settlement change is expected to bring numerous advantages, such as reducing counterparty risk, lowering capital requirements, and increasing market liquidity through the efficiency of T+1 settlement. Furthermore, early-stage discussions have begun in Europe regarding the possibility of adopting a T+1 settlement cycle. While specific details and timelines for the T+1 settlement adoption are yet to be determined, market participants and regulatory authorities are engaging in preliminary conversations to evaluate the potential impact and feasibility of such a T+1 settlement transition.
This demonstrates a growing interest in aligning settlement practices across different regions to promote global harmonisation and streamline cross-border transactions with T+1 settlement. Overall, the introduction of a T+1 settlement cycle marks a significant shift in the securities industry, aiming to expedite the settlement process and enhance market efficiency. With India leading the way and the United States and Europe actively considering this T+1 settlement change, it is evident that the industry is moving towards shorter settlement cycles to optimise operational processes and facilitate smoother trading activities.
The market has been aiming to decrease the length of the settlement cycle for quite some time. The settlement cycle refers to the time it takes for a trade to be finalized and for the buyer to receive the securities they have purchased, while the seller receives the funds for the transaction. In the past, T +2 settlement was considered a significant progress towards achieving a shorter settlement cycle. T +2 means that the settlement occurs two business days after the trade date, but the new T+1 settlement aims to reduce this period even further.
A shorter settlement cycle has several potential benefits. One of the primary advantages is investor protection. By reducing the time between trade execution and settlement, investors are less exposed to potential risks and uncertainties that may arise during this period. For example, market conditions or the financial health of the parties involved in the transaction could change, potentially causing losses or disruptions. A T+1 shorter settlement cycle minimises this exposure and provides investors with greater certainty and security.
Additionally, a reduced T+1 settlement cycle can lead to increased market efficiencies. With faster settlement, market participants can quickly reallocate their capital and engage in additional trades, facilitating liquidity and promoting a more dynamic market. This can also contribute to reducing market volatility and enhancing overall market stability. Furthermore, a shorter T+1 settlement cycle can help mitigate operational and counterparty risks. The longer the settlement cycle, the more time there is for errors or disputes to arise, potentially leading to failed trades or financial losses.
By shortening the cycle to a T+1 settlement system, the likelihood of such incidents decreases, promoting smoother and more reliable settlement processes. In summary, the market has been striving to shorten the settlement cycle, with T +2 settlement seen as a significant step and T +1 settlement as the next logical progression. A shorter settlement cycle offers various advantages, including increased investor protection, enhanced market efficiencies, and reduced exposure to operational and counterparty risks.
In order to achieve the current average equity settlement rate of 95% in the United States, a significant amount of manual investigation, review, and correction is required. This process involves thoroughly examining and verifying each equity transaction to ensure accuracy and compliance with regulations.
The manual investigation entails carefully scrutinising the details of each trade, including the buyer and seller information, transaction price, and any special instructions or conditions. This step is crucial in identifying any discrepancies or errors that may have occurred during the trade execution or reporting process.
Once potential issues are identified, a thorough review is conducted to determine the root cause of the problem. This may involve investigating discrepancies in trade confirmations, reconciling trade data across different systems, or analysing trade settlement instructions to ensure they align with the agreed-upon terms.
After the review process, appropriate corrections are made to rectify any identified errors. This can involve contacting the relevant parties involved in the trade, such as brokers, custodians, or clearinghouses, to resolve discrepancies and ensure accurate settlement.
This significant operational effort typically spans over two business days until the close of business on the day following the trade, known as T+1 settlement. This allows sufficient time for the manual investigation, review, and correction processes to be completed thoroughly.
The need for such meticulous manual processes is driven by the importance of maintaining a high equity settlement rate. Accurate and timely settlement of equity transactions is crucial for maintaining investor confidence, market stability, and regulatory compliance.
Efforts are continuously made to streamline and automate these processes to reduce the reliance on manual intervention. However, due to the complexity and intricacies involved in equity settlement, a considerable amount of manual effort is still necessary to achieve the desired settlement rate.