The playbook published by the industry trade groups outlines a road map for market participants to identify the implementation activities, timelines, dependencies and risk impacts that could arise when planning for the transition to T+1.
Bob Walley, a New York-based principal at Deloitte & Touche LLP who assisted in crafting the playbook, said firms need to start preparing for the transition now. "Every day lost is a day lost," he said. "Waiting for the SEC's rule, while it'd be nice to have certainty ... in my anticipation, (it) won't change (things) dramatically."
He added, "Right now, there's so much work to be done to understand what the impacts are, to get your resources in place, get your budgets in place now so you can progress the work. If you wait until the rule comes out, you'll have lost six more months and then you'll probably be under budget, you won't have your teams organized, you'll really be behind the eight ball and at risk of not meeting the transition dates."
Added Ms. Kane, "There's a lot (to do) and I think it's important that funds and firms begin their planning now and start looking at things because 2024 is going to be here before you know it."
The settlement cycle in the U.S. was shortened to T+2 from T+3 in 2017, a process sources said went smoothly and benefited all market participants.
Mr. Price said testing was crucial in the transition to T+2 and will be important to resolve any issues before a T+1 environment goes live. But while there are lessons the industry learned in transitioning to T+2 five years ago, this time will be different.
"It's not a Y2K moment or even a (T+3) to (T+2) moment where so much planning and preparation went into that and when you look back you say, 'That wasn't so hard; that was pretty easy,'" Mr. Price said. "This is a little bit more complex because you're really taking 24 hours out of the system. Things like errors and corrections, you're going to have to expedite that."
Automation will be key in a T+1 environment, Mr. Walley said. "There are tremendous opportunities to take the friction out of the settlement system and modernize it," he said. "I think that those who are preparing for T+1 need to look at the manual activities (where) people put their hands on keyboards and have to manually fix a broken data element or issues, that basically needs to be eliminated."
Most industry participants will be affected by the change, including broker-dealers, Depository Trust and Clearing Corp. participants, custodians and asset managers, Ms. Kane said. "In short, all industry stakeholders will need to ensure that they have appropriate budgets and resources to enhance systems, update processes and procedures, and participate in the industrywide testing scheduled for 2023," she added.