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T+1 proved to be a smooth transition for the US and Canada, and now participants have advised the UK not to be afraid to “have those difficult conversations”, as the country works toward the implementation of a shorter settlement cycle.
Market participants gathered to attend the 14th annual Canadian Securities Lending Association (CASLA) conference in Toronto. The panel entitled ‘T+1 in the Rearview’ discussed the move to a shorter settlement cycle for the US and Canada over a week after its official implementation.
Moderated by Phil Zywot, head of North American equities and US corporates at BNY, panellists were questioned on the unexpected surprises of the transition, recalls, automation, and how the UK should handle its own transition to T+1.
It appeared that the “unexpected surprise” from the T+1 go-live was that there were no surprises, said Ahmed Shadmann, head of Agency Trading Canada and non-US equities at State Street. He added: “I was preparing for the end of the world scenario, but it was pretty smooth. The preparation paid off.”
For one panellist, there were “a few hiccups” during the transition, however, market participants were prepared and continued to monitor the move.
An industry fear regarding the potential increase in fail rates during 27-28 May “did not materialise”, confirmed Mathilda Yared, managing director of global securities finance at National Bank Financial.
The panel agreed that the transition to T+1 brought the industry together, as firms participated in “an immense amount of collaboration and discussion”. However, one panellist in particular said that T+1 may be in the rearview, but it is a long road ahead. He advised firms to remain vigilant and to not become complacent.
In April, the UK government gave the go-ahead for the country to move to a T+1 settlement cycle. This journey will be led by the Accelerated Settlement Taskforce (AST), with the aid of its Technology Group, which aims to implement T+1 no later than the end of 2027.
Offering advice on the UK’s T+1 implementation, the panel noted that firms should not be afraid to have “those difficult conversations”. Companies should partner with all of the respected firms, leverage their vendors, and listen to the solutions that are out there.
Alexa Lemstra, director of client relationship management at EquiLend, encouraged the UK to “get a head start” as deadlines will “come up quickly”.
She continued: “Use the budget and focus of the deadline to look at your full lifecycle and understand where you can find more efficiency. Participants will be moving into a real-time environment, and so they will need that risk mitigation view, transparency and visibility in the back, middle and front office. Everyone needs to move quickly to handle any exceptions coming out.”
In conclusion, Yared said: “Partnerships between borrowers and lenders is extremely important. The UK needs to establish that line of communication, even if it is difficult.
“Take a look at the available market infrastructure. Maybe what you want to achieve as an industry with the currently available infrastructure is not possible, but there is no reason why firms can’t get together and put something in place that will help reach the needed end result, like we did in Canada.”
