It’s hard to believe that six months have passed since the shift to T+1 settlement in the United States, Argentina, Canada and Mexico. This acceleration in settlement was a step change from the previous T+2 system, which is why the move to T+1 wasn’t something that happened overnight.
It took a lot of planning and coordination among various stakeholders, including lenders, brokers, vendors and regulators. The Securities and Exchange Commission (SEC) played a big role in pushing this forward, and they have supported the industry throughout to make sure everything went as smoothly as it could have done.
Pirum has also played a meaningful role in this transition, by providing automation and connectivity technology to industry participants, both of which reduce the manual steps in recalling trades globally, with particular focus on US domestic activity.
This global coordination with clients was a key reason why Pirum built direct two-way connectivity and comments interoperability with FIS Loanet. Pirum’s clients on Recalls Manager have been able to leverage this connectivity from the day T+1 came into force.
In the subsequent six months, Pirum have sent FIS Loanet tens of thousands of recall messages – with daily numbers growing exponentially. The enhanced data sets shared have improved auto matching and acceptance across large numbers of borrowers. Previously, some firms had to manage all these recalls manually via email. Now, the process is managed system to system, enhancing the automation greatly and allowing clients to focus on exception management.
Many firms were well-prepared for T+1,having spent months (if not years) upgrading their systems and processes. However, there are still a large number relying on manual bifurcated processes and are ‘just getting by’.
Following North America’s shift to T+1, which provided a useful test case for the benefits of leveraging automation to achieve shortened settlement cycles, both the EU and the UK have committed to implementing T+1 sooner than originally expected.
As my colleague Duncan Carpenter mentioned, following announcements from ESMA and the UK’s Accelerated Settlement Taskforce (AST), “the runway that EU companies have for upgrading to T+1 readiness just got significantly shorter.”
To ensure a fit-for-purpose best practice model going forward, technology partners will have a crucial role to play, especially as the majority of industry participants will not only align to T+1, but eventually move to a T+0 model. Indeed, the technology is already here – Pirum effectively works on a real-time (T+0) basis.
Overall, the move to T+1 in the US has been a positive step forward and it should make the industry faster (i.e. more liquid), more efficient and reduce risk. Clearly, there are still some challenges to overcome as the EU and UK make the transition. For all our clients, globally, we look forward to partnering with them and ensuring recalls are managed efficiently, cost-effectively and accurately.
If you would like to discuss any aspect of T+1 or recalls management, let me know.