OPERATIONALIZING T+1 |Global Key Findings

DTCC FORWARD
In February 2023, the U.S. Securities and Exchange Commission (SEC) adopted final requirements for a May 28, 2024, T+1 implementation date for transactions in U.S. cash equities,
corporate debt, and unit investment trusts, bringing much needed clarity for firms to better plan for this important industry initiative.
According to new research conducted by the ValueExchange and sponsored by The Depository Trust & Clearing Corporation (DTCC) and the Canadian Depository for Securities (CDS),
with the support of the Association for Financial Markets in Europe (AFME), the Canadian Capital Markets Association (CCMA) and ISITC, many market participants face enterprisewide challenges around the move to T+1, with responses indicating varying levels of preparedness across firm types and geographic locations, as well as numerous impacts across thetrade lifecycle.
Survey respondents highlighted:• T+1 will impact the middle office, settlement, fails management, securities lending, and the corporate actions segments of the trade lifecycle.
• While 42% of respondents have ongoing, funded initiatives for T+1, 41% of respondents have not yet begun their preparations.
• Challenges are especially felt by the buy-side, with 61% of firms unprepared for the transition, primarily across mid-tier and boutique organizations.
• Over 50% of European and Asia-Pacific market participants have not defined their plans to manage critical areas such as foreign exchange and securities lending.
• In anticipation of the operational impact of T+1, 23% of investors are moving to centralized SSIs and trade matching to alleviate future service provider challenges.
With an established transition date, market participants can begin their focused preparation for T+1 by the May 2024 deadline, regardless of geographical location. Significant
challenges remain, and DTCC will continue to partner closely with the industry to promote a successful move to T+1 and safeguard the stability of the markets. We are ready to work
collaboratively with market participants to test, assess workflows, optimize global operating models, and drive greater automation.
Helpful Resources:• Review updated documentation, including the DTCC T+1 Detailed Testing Framework.
• Learn about our Institutional Trade Processing services to further automate existing post-trade processing workflows and improve same day affirmation rates.
• Contact DTCC Consulting Services for help addressing upstream and downstream lifecycle impacts.

Operationalizing T+1: Overview
Who participated in our campaign?
As a truly industry-wide survey, we have benefited from the insightsof over 287 organisations across the investment-cycle globally sofar. These respondents are broken down as follows:
How, where and when are we preparing for the transition to T+1
settlement cycles in the USA and Canada?
Led by DTCC and CDS, with the support of AFME, the CCMA andISITC, this ValueExchange survey sets out to explain how the world ispreparing for T+1 today. Leveraging insights from across the globe,
this survey is intended to provide a valuable resource to thoseplanning their own preparations in 2023 – by providing practical,
statistical insights that can directly contribute to your own thinking.
This document summarises the key statistical findings of ourcampaign. If you would like to benchmark you own T+1 plans thenplease complete our global survey using the QR code below. If you
would like to discuss your preparations further, please contact us at
info@thevalueexchange.co

If you would like to benchmark
your own T+1 plans, please
complete the survey here

Tier 1 (Over 100,000
employees)

Others (Software
providers, Regulators,
etc.)
14%

7%

Wealth / Financial
Advisors
6%

Brokers38%

Asia-Pacific7%

Europe17%

Tier 2(10,001 100,000
employees)
26%

Tier 3 (501 10,000
employees)
35%

North
America75%
Investors
22%
Tier 4 (Lessthan 500
employees)
33%

Custodians / Administrators
19%

the case for transformation
thevalueexchange.coOperationalizing T+1:
Our findings in ten key points

Key Themes

Key Data Points
T+1’s strongest impact
is not in North America

Global custodians in Europe andAsia-Pacific are feeling a 4.7/5
impact from T+1

T+1 is an enterprisechallenge

Investors

are so far not engaged on T+1 and risk overestimating their reliance on their service
providers to be readyImpacting six activities acrossthe trade cycle

Brokers

see significant challenges and costs inrealising T+1 – having to address internal(legacy) technology and external messaging
challenges at once

Preparation for T+1 is a
key challenge

41% of the industry (and 61% ofinvestors) have yet to begin T+1
preparations

Tier 2 and Tier 3
firms

need to begin engaging on T+1, given theamount of automation that still lies ahead forthem…creating a market
readiness issue

Only 46% of the market is on
course to be ready for T+1 in
March 2024

Europeansstruggle with FX as a headline issue – withlittle clarity emerging so far from fundingbanks

Operating rules are justthe beginning:

66% of the market is struggling
to resource T+1 projects

Securities
lendingremains a core challenge, with less than 45%of the market ready today

the case for transformation
thevalueexchange.coT+1’s strongest impact is not in North America
Brokers and Service Providers are shouldering the impact in North America – but Custodians and Investors
carry a heavier burden overseas
T+1 impact by location of respondent (0-5 scale)

USA / Canada

Brokers

Custodians

Investors

Service providers(Software firms, Consultants)

3.2

2.8

2.7

3.4

3.2

3.3

2.8

2.8

EuropeAsia-Pacific

2.8

2.5

4.7

3.7

2.8

…and smaller firms
are hardest hit by
T+1

2.9

Tier 1

3.1

Tier 2

3.4

Tier 3

4.7

3.3

1.5

the case for transformation
thevalueexchange.coT+1 is an enterprise challenge

Six activities are strongly impacted in the average firm – plus FX for investors… and FX is a
big issue forinvestors

T+1’s projected impact by activity (0-5 scale)

Investors

2.5

2.7

3.8

2.7

Account
opening /onboarding

Tradeexecution

MiddleOfficeForeign
Exchange

3.1

4.0

Funding Settlement

4.0

Fails
Mgt

3.5
3.5

2.9

3.3

Securities Collateral Corporate
Lending management Actions

2.2

Valuations

2.4

Brokers &Custodians

High

Scale of impact

the case for transformation
thevalueexchange.coPreparation for T+1 is a core issue
41% of the market still hasn’t begun planning for T+1

Stages of T+1 readiness, broken down by % of respondents…and 61% of investors are in theearly stages of readinessUSAmarketCanadianmarketBrokers

40%

38%

Custodians

33%

32%

Institutional
Investors

61%

61%

(% of respondents still scoping or with no changes planned, perinvestment market)

the case for transformation
thevalueexchange.co…leading to a market readiness challenge

Only 46% of the market is expecting to be ready for T+1 by March 2024. Can the rest catch up in 12 months?
Expected readiness timings for key tasks after T+1(% of respondents planning to reach intended T+1 timings)

Investors

41%

31%
16%

Brokers /CustodiansLive today

24%

10%

3%

By March 2024

By September / Labor Day
2024

After September 2024

17%

15%

3%

Don’t
know yet40%

the case for transformation
thevalueexchange.co

The “Don’t Know” problem is a significant challenge
In a market of interdependencies – who goes first?

Investors% of respondents who don’t know their plans in each area of T+1 preparation
Who is leading
and who is following?

55%
39%

38%

45%
31%

20%

Prime Brokers

26%

Institutional
investors

36%

Custodians

37%

Executing brokers

48%

Wealth managers

50%

Universal banks

20%

Brokers /Custodians

Don’t knowwhat timethey willcomplete
core
processes

Don’t knowwhat timethey will dotheir SBL
recalls

Don’t know
when they
will do their
FX

Don’t know
when theirT+1 projects
will run

28%
47%

Don’t know
how muchtheir T+1
projects will
cost

Don’t
know
when
they will
be ready
for T+1

20%

40%
55%
66%

% of respondents who don’t know
when they will be ready for T+1 – byindustry segment

the case for transformation
thevalueexchange.co…and providing clarity on launch dates isjust the beginning
Key issues such as budget allocations and legacy technology dependencies still lie ahead% of respondents facing T+1 preparation issues that either block or slow their progress, broken
down by issue

Lack of clarity on operating rules and implementation dates

19%

Competing projects / Securing project resources

17%

50%

49%

Executing on system changes / Dependencies on legacy technology

9%

56%

Availability of people to manage change

11%

51%

Competing regulatory projects

12%

47%

Blocking progress

Slowing progress

the case for transformation
thevalueexchange.co

Where are the major risk points today?

Global market participants: T+1 impact varies by region: securities are the problem in Europe andFunds in Asia-Pacific…but the impact is felt differently by region
T+1 is impacting market
participants everywhere

North
AmericaCash / Securities
are most
challenging forEuropeans

3.0

3.7

(Cash) Equities

4.0

3.6
3.4

Fixed Income

3.6
3.2

2.8

GDR (Global Depository Receipts) / ADRs (American
Depository Receipts)

3.6
2.5
2.5
2.7

Mutual Funds

EuropeAsiaPacific3.4

Funds andderivatives aremost challenging
for Asia-Pacific

3.3
3.3
3.4

ETFs (Exchange-traded funds)

4.0

2.4

Derivatives (inc. futures, options and swaps)

3.2
3.3

3.3
North America

T+1 impact by location of respondent; and by asset class (out of 5)

EuropeAPAC

the case for transformation
thevalueexchange.co

What is driving T+1’s impact?

A complex mix of challenges to contend with – relying on both internal and external resources to address

Why do you expect T+1 to have an effect on your processing?
(% of respondents citing each challenge)

Current
reliance
on manual
tasks
30%

Manual tasks achallenge for all

Provider /Marketstructure
challenges
30%

Vendor and market
dependencies mostacute for the buy sideand for small firms

Current volume
of bespoke / perclient messaging
types
17%

Current(legacy)platforms areunable toscale easily
15%

Current volume of
paper-based
activities
7%

Bespoke messaging achallenge for Tier 1
firms

Legacy platforms
challenging for large
firms

Paper-based activities
problematic for small
firms

Account opening /onboarding

Manual tasks

Trade execution

Market / Provider challenges

Middle OfficeManual tasks

Foreign Exchange

Market / Provider challenges

Funding

Market / Provider challenges

Settlement

Manual tasks

Fails Mgt

Manual tasks

Securities Lending

Market / Provider challenges

Collateral management

Manual tasks

Corporate Actions

Manual tasks

Valuations

Market / Provider challenges#1 driver of T+1 impact per activity

the case for transformation
thevalueexchange.co

Where are our T+1 execution risks?

Extensive challenges amongst Tier 1 firm; with resourcing a key dependency for many

Tier 1

Tier 2Tier 3Tier 4Lack of clarity on rules andimplementation dates

100%

65%

65%

65%

Competing resources / Securing
project resource

92%

81%

54%

61%

Competing regulatory projects

92%

79%

54%

41%

Availability of people to managechange

75%

81%

42%

61%

Executing on system change /legacy technology dependencies

83%

72%

54%

67%

Lack of clarity around industry
best practices

67%

65%

38%

63%

Key internal
challenges faced
in preparing forT+1 (% of
respondents citing
each issue)

the case for transformation
thevalueexchange.co

Where is the project activity?
37% of all T+1 activity is focused on process automation

Total project activity by segment, (% of respondents per segment working on each area)

Enterprise

Middle Office

Securities
Finance

Investors

25%

16%
13%

12%

10%

1%

Systemreplacement

Brokers & Custodians

Back Office0%Standardisationof Trade data
(using FIX /SWIFT formats)Hiring more
staff

7%

4%

New system /data integration(in Middle / Back
Office)Changes tolocations of
trade
processing

Using acentralised
provider for SSI
management

1%

1%

4%

Use of a
Centralised
Matching
Service
ProviderRe-paperingclientagreements /shifting to econtracts

4%

Changing
process toautoaffirmation

Outsourcing
our tradeaffirmations to
our custodian /prime broker

3%
Implementing
new record
keepingsystems to
track time ofaffirmations

1%

0%

0%

Implementing Implementing
Implementing
new margining
auto-recalls
auto-fails/ collateralsolution forcoveragemanagement
securities on
solution
platform
loan

0%
1%

5%

8%

10%

11%

5%

7%

11%

14%

Systemreplacement
andstandardisation
makes up 25% ofsell side project
activity

21%
10% of firms are
hiring to caterfor T+1

23% of investors
are moving tocentralised SSIs
and tradematching

23% of market
participants are
moving to an
automated /outsourced
affirmation
model

8% of market
participants are
moving toautomated fails
coverage

12% of sell side
firms arechanging their
SBL processes
due to T+1
the case for transformation
thevalueexchange.coHow are we adapting our footprints to cater for T+1?
T+1 is a footprint and staffing issue for 25% of the industry
37% of European Tier 1 and 2 organisations arechanging their staffing model to prepare for T+1

North
Americans

7%

New resourcing
on the US /Canadian West
Coast

Europeans15%

6%

New resourcing
on the US /Canadian East
Coast

15%

7%

New overnightstaff (inEurope/Asia)

11%

2%

42%

37%

Appointing
vendor to manage
T+1 booking intime-zone

No change

Don't know

0%

37%

22%

52% of European Tier 3 and 4 organisations arechanging their staffing model to prepare for T+1

the case for transformation
thevalueexchange.coOperationalizing T+1:
What next?

Key Findings

Benchmark
Scorecards

Live data
dashboards

Key
Findings
PodcastIndustry
discussion

Markethandbook

What did thesurvey tell us?

What does thismean for me?

How can this
support mybusinessplanning?

What are theheadlines?

What does thismean for theindustry?

What does thechange journeylook like?

A discussion documentthat highlights the key
statistical insights from oursurveyPersonalised scorecards forevery respondent

Detailed, interactive
dashboards giving you fullaccess to every survey
response

Specialist insights on our
Key Findings in a 30minute interview withleading experts

Presentations to a series ofglobal industry working
groups to turn our insights
into advocacy priorities
and outcomes

A comprehensive
handbook report thatshowcases thetransformation journey:
what to focus on, what
risks to expect and what
returns to look for(E-mail must be provided)

If you would like to benchmark
your own T+1 plans, please
complete the survey here
the case for transformation
thevalueexchange.coFor more information on DTCC Consulting Services, visit dtcc.com/consulting.
For more information on our products and services, visit DTCC.com
For information on careers at DTCC, visit careers.dtcc.com

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