Peter Welsby, head of European FICC trading, Manulife Investment Management
Regulation will continue to direct market trends in 2024, just as it has in recent years. The knock-on effects from the impending switch in May to T+1 settlement for US instruments need to be monitored and prepared for, particularly in FX. In fixed income, focus will remain on data transparency and whether consolidated tapes would be beneficial or detrimental to liquidity in the EU and emerging markets. Other topics that will continue to garner attention include ESG, peer-to-peer execution and the prevalence and perception of pre-hedging.
James Maxfield, chief product officer, Duco
In 2024, regulatory challenges will loom large for compliance departments within the financial services sector. Impending deadlines such as T+1 and Emir Refit will be top priorities for firms, demanding action. Against the additional challenge of the current economic environment, there will be a noticeable strain on budgets and resources. In response, organisations will need to work smarter and create the case for transformation to drive automation. This means leveraging technology, automating their infrastructure, and investing in the right areas, to not only meet immediate deadlines but also to proactively navigate potential future requirements like T+1 in Europe, global regulatory changes (such as the wave of refits) and the ongoing industry trend of becoming more data driven (around reporting, supervision and risk).
Transitioning to T+1 may mitigate risks in the trade settlement process; however, it also introduces additional complexity and potentially increased costs elsewhere. Although firms might have an inclination to rely on automation to address these challenges, automating processes with inaccurate data will still result in exceptions that require immediate management on T+0 to meet the new timelines. Firms need to employ a data-centric approach if they are to avoid difficulties in meeting deadlines and fulfilling data requirements. Those that grasp both the challenge and opportunity presented by T+1 will navigate the transition more easily, enjoy its advantages and secure a means to gain a competitive edge. The first half of 2024 will be an opportunity for firms to not only ready themselves for immediate regulatory changes but also position strategically for the evolving landscape of trading in the years ahead. It is time to change the mindset of acting after it’s too late and addressing problems before they arise.
Lisa Danino-Lewis, chief growth officer, CLS
May 2024 will see the implementation of T+1 in the US and Canada securities market, which will impact FX post-trade. Understanding the extent of the impact is key to helping the industry prepare. As a result, we are engaging with both sell- and buy-side clients to understand the challenges they may face with meeting a shortened settlement cycle and explore how CLS’s current suite of products can assist the market in the short term. We are also conducting a study with our settlement members to assess the feasibility of adjusting CLS Settlement processes to accommodate later cut-off times. As we move into 2024, the T+1 spotlight will broaden to bring the UK, EU and Switzerland into focus, with announcements expected from each as to their intentions with regards to T+1.
Val Wotton, managing director and general manager institutional trade processing, DTCC
In 2024 we will see the shift to a T+1 settlement cycle in the US, which promises significant advantages for financial markets. Benefits include reduced trade risk, lower clearing fund requirements, improved capital utilisation, and enhanced operational efficiency. However, for those firms who are still using manual post-trade processes, it is critical that they leverage automated solutions to achieve timely settlement. Further, to ensure a smooth transition by the implementation date of 28 May 2024, comprehensive industry testing is essential, covering end-to-end processes from trade execution to trade settlement and non-standard settlement scenarios.
As part of their preparations, it is crucial for market participants to understand what is required of them to comply with the regulatory mandate, including post-trade processes which are unique to the US, such as trade affirmation, which is a critical and unique step in successful trade processing in the region. Assessing operational efficiency and counterparties’ performance is also vital as over time, costs associated with late settlements or inefficient processes can add up. With the T+1 implementation date approaching, it is imperative to act now, understand the impact, test rigorously, and automate post-trade processes for T+1 readiness.
Mack Gill, chief operating officer at Torstone Technology
As we look towards 2024, I predict that automation will take centre stage. The ongoing transition to T+1 in North America has been a significant catalyst for the global industry, underscoring the need for more streamlined processes. However, the true game-changer will be the longer-term broader adoption of automation across financial operations. I foresee firms increasingly embracing automated solutions to enhance real-time processing and decision-making.
This shift is not just about keeping pace with regulatory changes; it’s a strategic move to harness greater operational efficiency, risk mitigation, and cost-effectiveness. Automation will play a pivotal role in transforming data management, compliance, and customer service, leading to more resilient and agile financial ecosystems. As the industry gravitates towards even faster settlement cycles and further integrates digital assets, the need for sophisticated, real-time automated systems will become more pronounced. The firms that invest in these technologies will likely emerge as leaders in a landscape where agility and efficiency are paramount. Next year, 2024, could well be remembered as the year when automation reshaped the financial services industry under the banner of T+1.