Affirmations by 9:00pm ET on trade date only increased marginally in February to 74.5%, according to data from the DTCC, which is still aiming for an overall 90% rate before T+1 comes into force in the US on 28 May.
In today’s T+2 environment, approximately 90% of all trades are affirmed by 11:30am ET on T+1 – the current affirmation cut-off point, and DTCC feels a similar target rate for a T+1 environment would be appropriate to ensure settlement efficiency remains high in the market.
The market infrastructure giant at the centre of the shift to T+1 has been tracking data of late and in December 2023 found only 69% of trades were affirmed by 9pm on trade date, while in January this rose to 73%. The 74.5% rate just a month later suggests slow progress, particularly when it comes to non-cleared flow, the bilateral settlement piece, where there are still challenges.
Subsequently, the DTCC has urged market participants to “ramp up their preparations and testing” and has encouraged continued collaboration between investment managers and their custodians.
Regarding the latter pair, custodian or investment manager – or self-affirmation – rates were 53% as of 9:00pm ET on trade date in February, up from 51% in January.
The prime broker affirmation rate was 83% – up from 81% in January – and investment manager auto affirmation – or central match – rate was 89%, down from 92% in January.
In January, Val Wotton, head of ITP at DTCC told sister publication, Global Custodian, that prime brokers and hedge funds are highly incentivised to get their transactions into clearing – which has resulted in a 95% affirmation rate in a T+2 world for NSCC trades. Additionally, eight of the top 10 prime brokers had already achieved a 90% affirmation rate by 9pm ET on trade date.
In a report issued in January, the DTCC noted: “Many custodians use omnibus accounts in which the custodian’s customers use the custodian’s TradeSuite ID number, mostly in the case of custodians for clients located outside the US.
“The challenge is, when numerous market participants use a single TradeSuite ID number, it does not allow clear visibility into which investment managers have affirmed trades on time and which have not.
“To bolster omnibus TradeSuite ID confirmation rates, DTCC has been partnering with custodians, particularly those with customers outside the US, to educate them on this issue, to highlight the nuances, and to suggest changes that can support higher affirmation rates.”