Accelerated Settlement Breakout Group
Explore the possibilities of moving towards a more flexible settlement system, including T0 settlement models, and discuss the implementation challenges and benefits. The breakout session delves into funding, FX, liquidity factors, technology processes, and data flows in the context of accelerated settlement in the financial markets.
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Presentation Transcript
ISSA Symposium 06 08 May 2025 Breakout Session 3: Accelerated Settlement 1
ISSA Symposium 06 08 May 2025 Accelerated Settlement - Hypothesis Following successful T+1 implementation in major capital markets centres, the remaining T+2 jurisdictions will move to T+1. It is now a question of when not if . Attention will move towards T0. Business cases will focus on the comparison of the marginal benefits of going from T+1 settlement to various forms of flexible settlement, including three potential T0 settlement models: End-of-day settlement following multi-lateral netting Real Time gross settlement Atomic settlement Benefits will be weighed against the investments required in new market practices and technology upgrades by all key market participants segments. ISSA makes no prediction as to the outcome of these investigations, except that - by 2030 - we expect a consensus on whether there is a compelling case for moving forward in the future to flexible settlement, including T0. The Accelerated Settlement Breakout Group should explore T0, Looking to validate whether the three models and their descriptions are correct and discuss their implementation challenges, including the extent of redesign of liquidity/funding, trading and post-trade processes, leading up to settlement of equity trades on T0. 2
ISSA Symposium 06 08 May 2025 Accelerated Settlement - Hypothesis The Breakout Session will then split into two sub-groups to discuss the following two sub-themes in greater detail: Funding, FX and Liquidity Factors: Domestic Funding International Trading and Funding Short Selling/Stock Loan/SFT Technology Processes and Data flows Factors: Trading/Allocations/Confirmations CCPs and CSDs Funds Asset Servicing Regulatory Technology 3
ISSA Symposium 06 08 May 2025 Accelerated Settlement Summary Observations on Hypothesis Agreement on: The hypothesis The 3 models and potential variations (hybrid, phased, interoperable) Breakout-Groups The nine factors that may be significantly impacted Recommendations: Market Place Add a 10th factor: the need for other industries or major players to move in concert with the move T0 Market Place The WG should focus on the business case questions and avoid evaluations and answers at this point - - Global Business Case Table of Contents The business case questions should revolve around all ten factors, under each of the 3 models and the value proposition for all key market participant segments including Retail investors Investment mangers/institutional investors domestic and cross border Broker dealers Global and Local Custodians Market Infrastructures Participants 4
ISSA Symposium 06 08 May 2025 Accelerated Settlement Detailed Findings Markets should be clear about the key objectives for the T0 exploration: o Retail investor de-risking/protection o Overall market cost/risk reduction o Market competitiveness Breakout-Groups Consult other industries: o Trading, o Commercial banking Market Place o Payments o FX The degree of Technology refresh will vary by models, and market segment Market Place Potential significant change in intermediation roles Trades may be conditioned upon certain traditional post trade factors including KYC being complete, SSIs being available and necessary inventory and liquidity being available Markets may have to choose between allowing for settlement fails vs. trades not getting executed Participants Ask whether Standardization of certain factors would be necessary for successful T0 implementation The Asset Servicing issues are significant and may require consultation with issuers India Case Study 5
ISSA Symposium 06 08 May 2025 Accelerated Settlement Proposed Next Steps Provide recommendations to the ISSA Accelerated Settlement Working Group WG revise the White Paper Outline Breakout-Groups 10 small teams will be formed to analyse each of the factors across all 3 models, and the impacts on key market participants We need new members of the WG with expertise around the ten factors Market Place Breakout Team participants have agreed to provide input on the white paper draft Market Place Participants 6
