Ready, Settle, Go: Reflections on Preparing for a Successful T+1 Launch

May 28 is launch day for T+1 – the rule that will shorten the securities settlement cycle to trade date (T) plus one day. Currently, firms are working on a T+2 timeline, but the Securities and Exchange Commission’s (SEC) accelerated settlement requirements mean firms must complete all post-trade processes in half the time.

The countdown to such a major change demands exceptional preparedness and alignment throughout an industry that plays a principal role in our economy. At BetaNXT, the breadth and scale of our clients make it hard to overstate the magnitude of our collective impact.

Consequently, we have been deeply engaged with both our clients and industry partners to understand, plan, test and verify our readiness. Our formula for success has three main themes: comprehension, partnerships, and innovation.

Comprehension

BetaNXT is a core securities processing provider and the second largest processor by volume at the Depository Trust and Clearing Corporation (DTCC). Our clients process annual trade volumes in the millions; our relationships are deep and extend back many years. Indeed, we guided and supported most of the same firms through the T+2 transition in 2017.

Our scale and history meant we were able to draw on a wealth of experience and trust as we approached the challenges of the T+1 settlement cycle. That said, we didn’t want to assume anything and approached this transition with precision.

Our first step was to ensure we thoroughly understood our customers’ needs and the upgrades and enhancements they required of our platform. Our goal was a seamless transition to a T+1 shortened settlement cycle without any negative effects. To realize this, we have endeavored to be a committed leader, enabling and promoting readiness for the shortened settlement cycle for our clients and the broader industry.

This leadership began over a year ago, starting with dedicated calls on the T+1 initiative with our client population. Over time, we’ve expanded the agenda from learning to support, allowing us to keep track of client progress. The meeting cadence has been maintained or increased, with bi-weekly calls for some clients. We also created a group email inbox so there’s always a place to raise T+1 questions and concerns.

The insights we gained from this engagement have directly informed our program of developments for the BetaNXT platform and inspired several innovations, which I’ve explored below. It also helped us to understand what we needed to achieve with our industry partners, especially the SEC, the Securities Industry and Financial Markets Association (SIFMA) and, from a critical processing standpoint, DTCC.

Our program of T+1 client communications also revealed a need to support our clients with SEC and DTCC demands for T+1 preparedness audits. Firms needed to show the SEC how they had prepared and what we as their service provider were doing to support them. We’ve made that support available as part of our process, including a representation of our thorough and rigorous testing from industry and business operations perspectives.

Partnerships

I mentioned industry alignment as a prerequisite for meeting the T+1 settlement cycle. Given its central role, expanding communication and coordination with DTCC was our priority. We structured our development and testing cycles alongside theirs, matching every adjustment in our platform with tests within theirs to ensure we saw the expected outcomes and zero negative impacts.

Our efforts to drive industry collaboration also extend back more than a year. A particular highlight was our T+1 Client Preparedness Forum, held in Milwaukee in January of this year. The purpose of hosting an onsite engagement was to create a forum where questions and best practices could be discussed openly for maximum benefit. It was incredibly productive to have peer group engagement among our client firms, T+1 Product Management experts from DTCC, and BetaNXT experts providing strategic support for the T+1 initiative.

This engagement has continued since the Forum, with ongoing remote support for migration and testing inquiries to promote ongoing preparedness. Our all-client call in May, promoting final preparedness prior to go-live, included representation from DTCC T+1 Product Manager and Strategic Relationship Manager to help address any remaining questions.

The BetaNXT collaboration with DTCC has been more than procedural. Understanding that post-trade processes would need significant streamlining to meet T+1 timescales, early on we identified opportunities to automate and accelerate the affirmation and settlement processes. With the shortened cycle, in order to reduce capital requirements for aged fails and settlement obligations, firms will be required to ensure counterparty standing settlement instructions (SSIs) are accurate in order to produce optimal effectiveness of the affirmation and settlement process. At BetaNXT, the efficiencies of our autocage currently allow our clients to settle 95 percent of their open obligations via straight-through processing (STP) with no manual intervention required.

Many firms complete affirmations manually or with the help of a custodian. By integrating the Match to Instruct (M2i) workflow with bi-lateral trade matching in CTM, DTCC’s central matching platform, clients could benefit from central matching and auto-affirmation of trades. We integrated M2i into our platform, passed DTCC certification, and prepared our clients by explaining the workflow and its benefits.

Now, among our clients that have adopted M2i, automation is now in place to help matching trades hit the 9 p.m. trade date affirmation deadline. Our integration with M2i will further enhance the automation of the current settlement processing offered via our autocage, resulting in even higher affirmation rates and automated settlement percentages.

I must also highlight the thoroughness of our testing regime. In addition to standard processing testing, we’ve performed bank holiday tests, a Good Friday test, and double settlement date tests, including three additional and specific BetaNXT tests. This began in August 2023 and will continue up to the T+1 launch.

Aligning BetaNXT, our clients, and DTCC has given us valuable insights, making any issues more noticeable. The closeness of our client and industry partnerships has enabled us to be comprehensive and confident when setting best practice operational procedures and providing documentation. We can be clear with all stakeholders about how the entire core processing system will operate and the procedures they must carry out to achieve the shortened settlement timeframe.

Innovation

The countdown to T+1 coincided with the transformation of BetaNXT into a comprehensive provider of user-centric wealth management solutions. Our mission is to improve the experience for operations professionals in support of financial advisors and the business.

Firms are seeking an end-to-end, holistic wealth management experience. Our Connected Wealth strategy unifies securities processing, cost basis and tax reporting, and investor communication. It provides critical data connections with visibility into the source and destination of all data that flows through our wealth solutions and partner network.

The timing of this innovation agenda meant we were in the ideal place to ask what additional capabilities would enable clients to better serve their business, advisors and investors, including support for settlement in a T+1 timeframe. We’ve also been able to make innovation decisions that move our platform toward a T+0 settlement cycle, developing future capabilities alongside our focus on T+1 compliance. We took this approach when planning the move to T+2 and it has proven to be beneficial in streamlining our readiness for T+1.

A key outcome of this innovation agenda is the BetaNXT Operations Workbench – a modular tool that provides user-friendly, end-to-end processing within the BetaNXT platform.

Workbench is much broader than T+1, but our vision to lead with automation, build efficient workflows with real-time data, and accelerate processes aligns well with the T+1 initiative.

We’ve built a settlement clearance module within Workbench that offers dashboards and workflows for all stages of a trade – from order, to clearance, and ultimately into settlement. Downstream of that are modules to assist with reporting, plus integrations with our other wealth management solutions, Maxit and Mediant. Integrating M2i into the workflow represents our inclusion of partners in the BetaNXT transformation program. We want our clients to have everything they need in a single interface – connectivity that ends swivel chair inefficiencies.

Finally, it’s also important to note that innovation often needs the guiding hand of human support. We’re doubling down on our high-touch approach, running weekly T+1 calls right up to the launch day. Over the Memorial Day weekend, we will operate a command center that bridges all participants and ensures an instant response to any issues.

What’s Next?

This post is the second in a series of analysis and reflection we’re doing at BetaNXT to share our learnings on preparing for a monumental industry shift. If you haven’t already, read our white paper on the history, significance, and regulatory implications of moving to T+1. Closely following the transition in late May, keep an eye out for our next installment where we discuss the transition itself and our thoughts on what’s next.

Learn the genesis of each shortening of the settlement cycle in our White Paper: T+1: Why This Time Feels Different from T+2