GBST (ASX: GBT), the ASX-listed wealth management and Capital Markets technology specialists, today launches a research paper written by Aite Group, concerning the benefits and challenges of “T+2 Settlement: Technology Challenges for the Day After Tomorrow.”
The paper shows the potential advantage to US markets in having shorter equities settlements, following a trend already adopted by markets in Europe and Asia. GBST is a leader in capital markets technologies, and their solutions are driving improved operations performance with leading financial institutions across EMEA, Asia, and North America.
Making a move to streamline the settlement cycle has been, in one way or another, on the agenda in the US since 2000. Of course, as is always the case with changing systems, a move to T+2 is not without challenges, but among its positive outcomes, it would harmonize American markets with those in Europe and Asia.
A likely short-term impact of a shortened settlement cycle will actually be a rise in the number of settlement failures. The establishment of new market practices and processes tends to result in an increase in settlement fails as market participants transition from one practice to another. However, the move to shorten the settlement cycle is a positive change for the industry overall Aite Group’s research reveals.
“The challenges of moving to T+2 settlement fall broadly into two categories—those that represent direct operational challenges in which technology and process changes will be required, and those that represent cultural and market practice changes. If the costs are perceived to outweigh the benefits—and for some firms this is absolutely the case—then a regulatory stick will be required to get them moving,” said Virginie O'Shea, co-author of the white paper at the Aite Group.
“GBST partnered with Aite Group to produce an independent analysis of the future challenges and opportunities that a move to a T + 2 settlement cycle will present participants in the US market. Working with Aite has assisted in exploring both the positive and negatives arguments associated with compression of settlement cycles,” said Denis Orrock, Chief Executive of GBST Capital Markets.
GBST has spent over 25 years expanding its strength in specialist technologies, market insight and leading the equities market in a next generation solution for middle and back office clearing and settlement. Most recently, the firm partnered with the Stockbrokers Association of Australia to develop a similar study for the Australian Equities Market.
“Moving to a shorter settlement cycle isn’t simply squeezing existing processes into the shorter timeframe, it is a once in decade opportunity to examine business process and ensure that an organisation is achieving maximum efficiency and removing risk from their operations. GBST has significant experience across equities markets around the world and believe our ability to contribute this expertise will help our clients shape the operational models for tomorrow, GBST has made significant investments into developing our capability with an eye to where markets may be in 2020 and beyond, not where markets are today” said Orrock