As part of the Heard at Ops series, Bob Walley of Deloitte describes where firms should be now in their journey to T+1 and the considerations and types of testing that everyone across the industry must plan for. Watch the video and read the Q&A below.

Q. The T+1 Playbook was updated to include the SEC’s final rule for Accelerating Settlement and the transition date of May 2024. Where should firms be now in their journey to T+1?

T+1 has been an industry hot topic since February of 2021 and SIFMA, ICI, DTCC and Deloitte have been a big part of moving that transition forward. And it was great to get the final rule to come out of the SEC in February of 2023.

But what that has done is it’s given us a limited window from which firms need to be ready. So, firms need to make sure that they have their program offices up and running, that they truly understand their books of work, and that they have allocated the funding required. Then firms need to go into a very detailed analysis to know:

• Why are they having settlement breaks?
• What types of funding requirements will they have?
• What kinds of operational challenges are they facing?

While firms have been at this a long time, it still feels that we have not gotten granular enough. We need to dig further to solve some of these problems. Once the settlement cycle moves to T+1, we move from 19 hours of getting information into the central repository to 5 hours.

Q. What are some of the challenges and considerations that firms must plan for?

The analysis of all the systems that contribute to post-trade activity needs to be looked at. Some firms have 500-600 systems that are part of their ecosystem that produces data, that send one file from one system to another. Firms need to understand the interdependencies of those systems and the data so that the nightly cycle will work.

We then need to test the entire environment for resiliency, to work through the nitty gritty details including:

• Understanding when there is an outage.
• Having the ability to detect that outage.
• Being able to resolve or recover from that outage.

My suggestion is that every firm should be looking at what happens throughout their systems on a minute-by-minute basis after 4:00 on trade date, all the way to 4:00 on T+1, and to know what the systems are producing and to understand the resiliency factors that need to be incorporated.

Testing is going to be one of the most critical points of this. The thing that concerns me is: will we have enough time? We are not going to rush the testing. We were successful in 2017 with T+2 because of all the testing we did. In 2023 and 2024, we have gotten a much more compressed timeline to make sure this happens.

Q. Describe the different types of testing for T+1.

The three dimensions of testing needed for a successful transition are:

1. Firm testing – In addition to system changes, firms will need to test at the transactional level. We are not going to have as many functional changes for T+1, but we will see a lot of testing across different asset classes.
2. Client testing – It is very important for firms to reach out to their clients and coordinate testing with them. Clients, too, are making technology changes and improvements to their ecosystems to comply with T+1. This testing goes both ways: from firm to client, and client to firm.
3. Industry testing – There is a tremendous amount of attention being paid to industry-wide testing, which opens on August 14, 2023, and DTCC is being very thorough communicating with the industry.

Bob Walley is Principal, Financial Services at Deloitte and is working with SIFMA, ICI and DTCC as part of the PMO for the transition to T+1.

Related Resources

• Explore SIFMA Ops

  Heard at Ops: The 2023 Series

  The Heard at Ops series features one-on-one conversations with operations and technology leaders filmed on-site at SIFMA Ops, the definitive conference for operations professionals in financial services.

• View SIFMA Resources

  Shortening the Settlement Cycle

  Access the resources and tools for the latest information on shortening the settlement cycle including the T+1 Industry Playbook, UST1 Resource Center, SIFMA's T+1 Training Video, and more.

• Read SIFMA Insights

  Operations Conference & Exhibition 2023 Debrief

  Read our debrief from the 50th annual SIFMA Ops Conference. Gathered over three days of presentations and events, this note provides insights into top-of-mind topics for market participants.

• Sign up for our newsletter

  SIFMA SmartBrief: Operations and Technology Edition

  The smarter way for operations professionals to stay on top of industry news and trends.

• Mark Your Calendar

  SIFMA Ops 2024

  SIFMA's next Operations Conference & Exhibition will be held on September 15-18, 2024, at the Marriott Marquis San Diego Marina.