Shortening the settlement cycle for equities, corporate and municipal bonds, ETFs, and certain mutual funds is once again top of mind due to a recent amendment from the US Securities and Exchange Commission (SEC). Designed to reduce counterparty and systematic risk and improve capital efficiencies, the amendment requires market participants in the U.S. to transition from a T+3 to a T+2 settlement cycle on September 5, 2017.

Today, I’m taking a closer look at what that means for organizations and how operational leaders could begin to prepare.

The challenge

T+2 settlement will require operations teams to complete the trade verification process—including allocation, confirmation and affirmation—and deliver settlement notifications to custodians faster.

Some investment management firms may already have the technology, standardized processes and straight-through-processing (STP) capabilities required to make that happen. They actively track and benchmark key performance indicators (KPIs), and know exactly how far they have to go before they achieve T+2. For those with disparate trade processes, an abundance of manual or batch processes, incomplete performance metrics and legacy technology that’s not easily optimized, achieving T+2 will likely be more challenging.

Identifying gaps

A first step is to review key performance indicators and measure the effectiveness of your existing processes, procedures and technology. The goal of this assessment is twofold: to determine your operational readiness and to develop a strategic roadmap.

  1. Begin with an in-depth analysis of your current trade support function (point A).
  2. Compare the results with your future requirements (point B) to identify key organizational and technological gaps.
  3. Develop a strategic roadmap to close the gaps and take your organization from point A to point B.

This exercise should help you understand the sequence of events required to achieve your target end state, and appreciate the opportunity costs and relative priority of each step along the way. The work you do now should not only prepare your organization for T+2, but could also help set you up for the possibility of T+1 down the line.

Planning for change

Read the report.

As this industry-wide initiative comes into focus and industry leaders provide additional guidance, your firm should consider incorporating these changes into your strategic project plan and budget. As with many changes that impact the entire industry, the demand for external resources increases while internal resources continue to juggle multiple priorities.

Firms that are quick to recognize their existing limitations and plan accordingly to remedy those shortcomings would have the best shot at a smooth transition to T+2 when the September deadline rolls around.

For more information, read InsideOps: T+2 Settlement is Finally Here or contact me at

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