Industry Survey Reveals 80% of Market Participants Believe T+2 Will Become Global Settlement Cycle
New York/London/Hong Kong/Singapore/Tokyo/Sydney – April 27, 2015 –A comprehensive study published by Omgeo, a wholly owned subsidiary of The Depository Trust & Clearing Corporation (DTCC) and the global standard for institutional post-trade efficiency, reveals that 80% of respondents believe T+2 will become the global standard for settlement cycles within 10 years. Currently, settlement cycles vary between T+3 in the U.S., to T+2 in Europe and differing cycles across Asia, including T+2 in Hong Kong and T+3 in Singapore. 52% expect the U.S. to move to a T+2 settlement cycle within the next three years while 34% and 14% believe Canada and Japan, respectively, will do the same.
Tony Freeman, Omgeo’s Executive Director of Industry Relations, said: “It is encouraging to see overwhelming support for a globally harmonised settlement cycle to T+2, which would significantly reduce counterparty and operational risk across the financial markets. Harmonising settlement cycles globally will help to better facilitate cross-border trading, as well as reduce margin and liquidity requirements during market volatility. So far, Europe’s move to T+2 has been smooth, as recognised in the survey. However, there are still wide-ranging views on failed-trade penalties and on the sanctions that should be implemented for non-adherence. The future will bring further change, with more detail expected on the settlement discipline regime.”
The survey confirmed that, in terms of Europe’s move to a T+2 settlement cycle last year, 74% of market participants believe the migration was smooth, with only 12% citing they would have a low chance of meeting the Central Securities Depositories Regulation (CSDR) 99.5% settlement efficiency target. There was an almost equal split in opinion on whether the proposed compensatory, not punitive, sanctions from the CSDR for failed-trade penalties would be enough to drive behavioural change.
Paula Arthus, President and CEO at Omgeo, said: “For firms with European trading activity, automating post-trade processes is critical. Our research confirms this. 62% of respondents believe that it makes sense to send allocations and settlement instructions to broker/dealers on trade date and that broker/dealers must confirm allocations within just two hours. Furthermore, over 90% think that accurate Standing Settlement Instructions (SSIs) are relevant for T+2 settlement cycles. Omgeo’s automated solutions, Omgeo Central Trade ManagerSM (Omgeo CTM) and Omgeo ALERTSM, are well-positioned to help the industry meet this growing need.”
Formed in 2001, Omgeo automates trade lifecycle events between investment managers, broker/dealers and custodian banks, enabling 6,500 clients and 80 technology partners in 52 countries around the world to seamlessly connect and interoperate. By automating and streamlining post-trade operations, Omgeo enables clients to accelerate the clearing and settlement of trades, and better manage and reduce their counterparty and credit risk. Omgeo’s strength lies within its global community and its ability to create solutions to enable clients to realize clear returns on their investment strategies, while responding to changing market and regulatory conditions. Across borders, asset classes, and trade lifecycles, Omgeo is the global standard for operational efficiency across the investment industry. Omgeo is a subsidiary of The Depository Trust & Clearing Corporation (DTCC). For more information, follow us on Twitter @Omgeo.
With over 40 years of experience, DTCC is the premier post-trade market infrastructure for the global financial services industry. From operating facilities, data centers and offices in 15 countries, DTCC, through its subsidiaries, automates, centralizes, and standardizes the post-trade processing of financial transactions, mitigating risk, increasing transparency and driving efficiency for thousands of broker/dealers, custodian banks and asset managers worldwide. User owned and industry governed, the firm simplifies the complexities of clearing, settlement, asset servicing, data management and information services across asset classes, bringing increased security and soundness to the financial markets. In 2013, DTCC’s subsidiaries processed securities transactions valued at approximately US$1.6 quadrillion. Its depository provides custody and asset servicing for securities issues from 139 countries and territories valued at US$43 trillion. DTCC’s global trade repository processes tens of millions of submissions per week. To learn more, please visit www.dtcc.com or follow us on Twitter @The_DTCC.