Global Financial Institutions Face Challenges with North America's T+1 Settlement Mandate

In a newly released study by Vermiculus, a prominent provider of market infrastructure technology, alongside GreySpark Partners, vital insights into the global impacts of North America's T+1 trade settlement mandate have been unveiled. This transition, while largely seamless for firms in the U.S., showcases significant operational hurdles for financial institutions across Europe and the Asia-Pacific (APAC) region.

The shift from T+2 to T+1 not only shortens the timeline for post-trade processing but also presents unique challenges due to differing time zones around the world. As firms adapt, they encounter issues such as misalignment of trading schedules, pressures in currency exchange execution, and the looming threat of settlement failures. According to Lars-Göran Larsson, an industry expert at Vermiculus, the urgency for firms to embrace automated affirmation and allocation processes has never been greater. "With the shift to T+1, especially across time zones, automated affirmation and allocation processes are no longer optional," he states. This stark reality necessitates that firms act promptly to prepare for upcoming, abbreviated settlement cycles spurred by the prospects of a continuously global trading environment.

As firms grapple with these challenges, critical adjustments to their systems are essential. The industry is moving towards proactive solutions that involve pre-trade risk calculations and preemptive funding strategies. Furthermore, the ultimate goal is not just to adapt to T+1 but to streamline towards a future characterized by 24/7 trading and real-time settlement. This evolution represents a significant shift in the way traditional trading technology functions and will require a modernization of firms' post-trade infrastructures to meet this new demand.

The report emphasizes the increasing convergence of digital and traditional assets in financial markets, underscoring the growing pressure on firms to evolve their operations accordingly. The stakes are high; institutions that fail to adapt may find themselves at a competitive disadvantage in an increasingly fast-paced market.

For those interested in a deeper dive into the specific effects of T+1 on North American firms, an earlier report from Vermiculus offers valuable insights on this topic.

About Vermiculus Financial Technology

Since its inception in 2020, Vermiculus Financial Technology AB has emerged as a cutting-edge provider of trading, clearing, and central securities depository (CSD) solutions for market participants globally. By merging state-of-the-art dynamic microservice architecture with extensive experience in clearinghouse operations, exchange requirements, and CSD needs, Vermiculus is positioned to drive significant innovation in market technologies. Hailing from Stockholm, Sweden, the company's team is comprised of industry experts dedicated to revolutionizing the technology utilized by exchanges, clearing houses, and CSDs. This team's impressive track record includes successfully undertaking over 75 projects for some of the world’s leading exchanges and financial institutions.

For further inquiries or information, interested parties may contact PR Communications Specialist Amelie Hedenstierna at Vermiculus.

Through this study, Vermiculus and GreySpark Partners shine a light on the vital adaptations that financial institutions worldwide must make in response to North American regulatory changes, paving the way for future innovations in the industry.