T+2 Settlement Implementation in Europe

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Challenges to APAC Readiness

GreySpark Partners presents a report that examines the significant changes to global settlement practices triggered by the EU’s Oct. 6, 2014 move to T+2 settlement. The report examines the challenges and risks faced by Asia-Pacific market participants in adapting to T+2 settlement and the opportunities these changes create for investment banks to improve efficiency and automation in the capital markets trade lifecycle.

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This report focuses on how the EU’s shift to T+2 settlement will necessitate changes to various operational units within banks. The report explores how the effects of these changes will impact not only the operations of banks in participating EU states, but also the operations of many different types of global capital market participants that trade with banks domiciled in those EU member states.

Specifically, the report examines the anticipated impacts of T+2 settlement on market participants in Asia-Pacific and the current state of settlement protocols and post-trade automation in the region. By detailing the key factors that create risks and challenges to compliance with a shorter settlement cycle – for example, a lack of automated post-trade processing, time zone differences and liquidity management mismatches – this report provides an assessment of the hurdles Asia-Pacific market participants can expect to face in preparing for the EU’s move to T+2.

Research conducted previously shows that same-day trade affirmation is a key prerequisite for a successful shift to T+2. Alongside same-day affirmation, there are other steps that banks can take to streamline and improve post-trade processing. For example, large organisations with a global operational footprint can leverage their existing post-trade management teams in other regions to ensure facilitation of timely settlement. While the time zone issues relating to a shorter settlement cycle cannot be completely eliminated, they can be better controlled and managed with greater automation and straight-through processing.

To provide a view into the automation options available to banks, this report also provides Asia-Pacific and European buyside firms and sellside banks with insight into the vendor solutions that exist in the post-trade processing arena. An assessment of the post-trade automation levels and settlement protocols of 14 Asia-Pacific countries is highlighted in the report, as well as the relative level of impact the T+2 settlement change in the EU will have on these Asia-Pacific countries.

The EU’s shift to T+2 creates an incentive for countries in Asia-Pacific to consult the capital markets industry in the region on moving to a T+2 settlement cycle. Hong Kong, India and Taiwan all recently implemented the T+2 cycle and Australia, Japan and Singapore are considering a shift to T+2 by 2016. In the evolving Asia-Pacific capital markets regulatory landscape, this report can assist market participants in understanding the strategic factors to consider in preparing for the EU’s shift to T+2.

Published on: 30 Sep, 2014

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T+2 Settlement Implementation in Europe – Table of Contents

  • 1.0 Europe’s Move to T+2 Settlement
    • 1.1. Background on the Move to T+2
    • 1.2. Scope of the T+2 Changes and their Benefits
    • 1.3. Direct Impacts to Post-trade Operations
    • 1.4. Indirect Impacts to Post-trade Operations
  • 2.0 Implications and Challenges for Post-trade Operations in APAC
    • 2.1. Settlement Protocols in APAC
    • 2.2. Implications of T+2 for APAC: Challenges and Risks
  • 3.0 Vendor Initiatives
  • 4.0 Recommendations
  • 5.0 Appendices
    • 5.1. Glossary of Terms
    • 5.2. Table of Figures