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T+1 and the Impact for Fund Managers in Asia

Ignatius John, Vice President of Product Management for NYFIX Matching, participated in an insightful webinar "APAC Webinar: T+1 and the impact for fund managers in Asia”, organized by The Alternative Investment Management Association (AIMA). Alongside other industry leaders, the panel explored the T+1 changes and their impacts from the APAC perspective.

Missed the live session? Don't worry, you can now watch the on-demand webinar here.

As the buy side looks to transition to T+1 Settlement Date on 27th May 2024, firms are looking at what the operational risks involved in this acceleration of processing.

The change in settlement processing means that global investors will need to “affirm” all US trades by 21:00 ET on T+0, trigger all recalls on US securities by 23:59 on T+0, and then settle all of their Canadian trades by 03:59 on T+1. All trades in North America will then settle on T+1. Meaning with up to 14 hours’ time difference, in Asia we will have no option but to complete all trade processing on trade day.

The following are covered in the webinar:

  • What is T+1 and why is it happening?
  • How will North American T+1 changes affect transactions for clients in Asia Pacific?
  • What are the foreseeable operational challenges?
  • Will there be exceptions to trade matching in different time zones?
  • Will there be penalties for buy-side for late settlements after T+1 is instituted?
  • How to prepare for T+1
  • Besides post trade matching, what other areas are impacted by T+1?


  • Ignatius John, Vice President, Product Management for NYFIX Matching, Broadridge
  • Kher Sheng Lee, Managing Director, Co-Head of APAC and Deputy Global Head of Government Affairs, AIMA
  • Abdel El Ferdi, Head of APAC Middle Office & Alternative Investments Operations, BNY Mellon
  • Elizabeth Handy, Head of APAC Prime Financial Services Client Experience, J.P. Morgan
  • Kia Oboudiyat, Chief Strategy Officer, Global Foreign Exchange, Northern Trust

T+1 and the Impact for Fund Managers in Asia

Video Transcript

Speaker 1 Hello and welcome. Today we delve into the critical transition to T+1 settlement date for the North American market: US, Canada and Mexico. This is a significant shift that requires prompt strategic changes by fund managers across the globe, especially those here in Asia. Because T+1 means with a 14-hour time zone differences across Asia, we will have no option but to complete our trade processing on trade day. You may have to hire more people, work longer hours, automate more what you do, or in some cases reposition some of your trades and exposures. AIMA has been very vocal early on in cautioning the US SEC about some of these cross-border issues. Misalignment with markets that remain on T+2, as well as other operational issues such as FX conversion, timing mismatches and so on and so on. You can read our comment letter on the email website and more. We have also published an implementation guide for managers as we navigate these changes. With the impending change set for the 27th of May 2024, we continue to have conversations with the staff and commissioners of the SEC as new operational issues have come to light as industry testing progress. Closer to home, we are also keeping APAC regulators, such as the SFC in Hong Kong, up to speed on the state of the industry readiness.


Today, our webinar will focus on unraveling some of these operational nuances, the anticipated challenges, as well as the preparatory steps our industry must embrace. Joining me today, we have an all star lineup who will bring a wealth of experience expertise to help fund managers navigate the changes ahead. Ignatius John, Vice President, Product Management for NYFIX Matching at Broadridge. Abdel El Ferdi, Head of APAC Middle Office & Alternative Investments Operations with BNY Mellon. Elizabeth Hendy, Lizzie, Head of APAC Prime Financial Services Client Experience with JPMorgan Chase and Kia Oboudiyat, Chief Strategy Officer, Global Foreign Exchange with Northern Trust.


Today, we have close to 260 of our members joining us from all around the world: Afghanistan, Australia, Canada, Hong Kong, Japan, Singapore, the United Kingdom, United States, Vietnam and many, many more. As always, the AIMA house rules apply for our webinars. Today's webinar is being held under the Chatham House rule, so whatever comments or discussions we have today are not to be attributable to anyone without explicit permission. As always, we encourage you to use the Q&A function. The panel will be taking some questions and this webinar is being recorded for replay. So if you have colleagues who are not able to join us live, they have an opportunity to catch up on the action. So we'd like to start, today's discussions by framing where we are and also getting a sense of how prepared the industry is in front of you. On the screen, you will see a polling question. We very much like to invite our attendees to respond to that, please. The polling question is, as you can see, what do you know or understand about T+1?


The answers range from automation, transparency, delegation to know my problem, resourcing, and so on. So would like to, give attendees who is joining us from out of work a couple of minutes to respond to that. And once the results are in, I'll invite the panel to offer their reaction. So polling starts now. Whether you're joining us from your desktop, your mobile device, should be easy enough to, put in your response. I’ll let polling stay open for a bit longer just so that we can get a reaction from our members around the world. Right. Maybe another 30 more seconds. Okay. This is your last opportunity to have your say and put in your vote. All right. I guess, Kathy, at your cue. Feel free to close it, and we'll pull up the results. Okay. Well. Resourcing. Maybe hire more people. Split your bodies. What more shifts? That's 23%. Think it is a challenge. And that's quite true. It has been identified as a challenge. Some. A small minority say is not my problem. Okay. That's quite refreshing, like that. Automation. 55%. That could well be the answer. Right. Let's hear from the panel. Just to get a reaction. Let's start with Lizzie first. Lizzie, what are your top line instant reaction to the polling result?


Speaker 2 Yeah. I mean, I definitely appreciate the “not my problem” response. But it is good to see that, automation is definitely up there along with transparency and resourcing, because those are some of the key topics that we'll, we'll cover today. And they are very important to, understanding the T+1 settlement cycle for the DTC.


Speaker 1 Thanks Lizzie. Let's hear from Kia. Kia, your thoughts?


Speaker 3 Yes, similar to Lizzie, but I think one of the ones we've also heard from a lot of the discussions we've had is delegation. How do you partner or find solutions, not only automation and resourcing, but looking at delegation options as well, but generally agree with what Lizzie said and what we're hearing here.


Speaker 1 Right. Actually, we are missing one response. We should have a response that says, never heard of this issue. Maybe that's why you need to be here. And, at this very AIMA webinar. Thank you for that. Abdel, your thoughts?


Speaker 4 Yeah, I'll probably start on the lighter note, which is the deferral “not my problem”. I know we're going to talk about what it means not to, you know, allocate and affirm, by the end of U.S. day. And what does it mean from a penalty standpoint? And the reality is it varies depending on what type of, I guess financial player. You are right between the prime brokers and the rest. And, the migration to T+1 will only work and be efficient and work as expected if there is automation. So Lizzie touched on automation as being a key, a key component of it. And, and you talked about resourcing and I'm sure we going to talk a little bit about, you know, the impact to operating and support models, and resourcing being a key component of that. So yeah, I think it makes perfect sense.


Speaker 1 Right. Thank you. I guess my message to, all our members around the world is that even if you have been sleeping for the last few months or the last two years, it's not too late, I guess. And today is the time to catch up on the action. So what we'll do is I'm going to get into Ignatius’s reaction as well. And also turn it over to Ignatius because he's going to help us set the scene, provide an overview of some of the issues. And once Ignatius finishes up, we're going to have a discussion among the panel on some of the big topics. So, Ignatius, with that, I'll turn it over to you. Feel free to comment on the poll and and take us forward. Thank you.


Speaker 5 Thanks Kher. I did I like the fact that automation was, what's the highest number there? Because I feel that that is really what is going to be scalable going forward. And the transparency also was number two. So, I'm glad to see that response from the participants. And, of course, I did like that, that there was only a 2% on “not my problem”, which I thought was, good. But just to go back to the whole T+1 issue, I've been directly exposed to it, being in the US. The big issue was, of course, with the SEC mandating to the asset managers, this is, the law on the section 204A where they need timestamps to be provided if there is an audit. And of course, for the brokers, they have what they call 15 C6 to 8 regulations where the brokers need to send out the report at 9 p.m. on trade day, which is what, the issue really is going to be, because if the asset managers do not send them the allocations in time, the brokers, or the vendors will not be able to match and pass the affirmations back to the broker so they can generate that.


So this is really where, we as the, in the industry need to look into this very carefully and make sure that, trades that are done in the US meet these requirements. Some of the bigger, factors that do impact, global managers are FX. For example, this is, you know, FX right now is on T+2 settlement. And if you're going with T+1, then clearly there needs to be some kind of an agreement, understanding for the asset managers that if I have to use, proceeds that have to come from a, from, say, from Asia, which I'm selling trades in the U.S, if I need the dollars, I need to be able to liquidate and get the cash in time. So then if you can't, then then do you work with your primes, to get some kind of an overdraft facility or with your custodians to be able to provide that cash. If you can't settle the FX within the T+1 timeframe after May.


The other one, which we also look at is the securities lending. Right now, if you are doing any long shot trades in the U.S, the recall when you when you are borrowing a stock from an organization, they have time to 3 p.m. on T+1 to make the recall, which is not going to work for T+1 settlement because if they can recall at that late in the trade, it could cause a problem. So now the SEC is looking to move that a time much earlier and maybe bring it to 3 p.m. on trade date itself. So those are some big issues that have to be tackled. And the SEC is looking into it. Some people have asked me about what is going to be the fine, and nobody really knows what are the fines if you don't comply after May, with these regulations, T+1 is something which I believe is the evolution of the whole life cycle. In 2017, it was T+3, and then they move, in 2017, to T+2.


And, this was inevitable. We will be expecting this. And I the way I look at this in the industry is that the technology is there to provide a T+1 settlement cycle, but there's just that the regulations around the financial markets, have to be realigned to be able to provide a complete straight through process for the T+1, settlement. Transparency also I believe along with the automation, it's very important because I look at transparency as, keeping the buy side totally informed. And that's what I mean by transparency. So in other words, once a trade has mismatched, with the executing broker, it's very important that the, information is passed back to the operations desk within the asset management firm and going up all the way into the trading desk. So they know that there's been a problem on t, and also when, the custodians of the prime brokers settle a trade that this is very good transparency comes in, which is not there right now, but many of the platforms where the prime brokers or the custodian banks send a message back on T+1 possibly that you know, that the trade has been settled. And so this way the asset managers know it's been settled. That's what I believe. Transparency. So it's taking it all the way back to the product itself. Those are the big updates that I've very briefly touched on on T+1, but I'm happy to answer further questions as we go down through this process.


Speaker 1 Thanks Ignatius. For the overview, I think we can bring in the rest of the panel. So just staying on the big picture, I want to invite the rest of the panel to chime in based on you know maybe an elaboration on how this new T+1 accelerated settlement cycle - how is going to impact transactions in the APAC region? I know Ignatius has got the ball rolling, but it would be good to hear from the rest as well. Just really from an overview perspective. Maybe we could start with Abdel. Abdel, maybe your thoughts just from a high level.


Speaker 4 Yeah. And I think Ignatius just touched on, you know, what that means more broadly. But for, you know, the players in the APAC market, we are used to the challenges of time zones. And I think what that brings really into perspective is exactly that right. So, you know, when we talk about the impact of T+1, I always say if you are a global player, global manager, who has a footprint across regions and time zones, what this means, it ultimately is shifting right where you have followed the sun model that actually works and works effectively. This ultimately means the shifting of activities and some actions. And, you know, we talked about resources to be closer to that U.S. day and U.S. end of day.


But the reality is, if you are a truly Asia manager, really operating within the Asia time zones, what that essentially means is completely readjust and adapt to operating ultimately and mostly within a US day. Right. So the T +1 mandates that you allocate by 7 p.m. and that you are firm by 9 p.m. and so all of that or most of that happens, you know, towards the end of US day, there is a, you know, an option to use a number of places and locations, for instance, in Asia to leverage that, you know, to make the most of that start of Asia Day. But the reality is that, you know, you will be presented with those challenges. And it's a global phenomenon, a global trend, the short settlement cycle. Ignatius talked about, you know, US moving from T+3 to T+2 in 2017, and now we moving to T+1. And you are already hearing questions about T0. And the impact of that is basically revisiting, you know, completely the way that, you know, the operating model that the fund managers have in place, be it for execution or ultimately operational support. And I think the last word I will offer is, I mean, we're talking about fund managers specifically, but the reality is, for this to work, you need your partners to come along as well, right? Your brokers counterparties, your clearers, your custodians, because it's an end to end change that involves all players in the market to kind of come on board and help implement it.


Speaker 1 Okay. Abdel thank you for that. Let's go to Lizzie. Lizzie? Your high level thoughts on the impact?


Speaker 2 Yeah, of course. I think Abdel and Ignatius really touched on a lot of key points. As we start to and in Asia, we are familiar with shorter settlement cycles. Right. So deeply moving to T+1. We have experienced this before with India moving to T+1. Ignatius already mentioned the big change that we start to see is on this, break management. Your middle office operations teams. Do you have teams based in EMEA or the US that can cover any trade breaks during the day, or are you solely based out of APAC? And how are you going to kind of work through and manage that? And at the same time, it really does offer an opportunity to look at your internal processes and say, what's manual, what's redundant, where can we kind of clean things up in order to get to a more automated place? And you can build that to scale, right. So it's not just building for T+1 in the DTC market, but can I replicate any of these processes that I've built out across, you know, other trade processes that I have internally?


Speaker 1 Right, Lizzie. Thank you. Kia your thoughts? Still the same thing?


Speaker 3 Yeah, absolutely. I think, you know, the focus comes down to the timezone. So if you are on a global player, as I've mentioned, you know, how do you look to solve that conundrum. And what we're really seeing is two real options. Do you resource that, which obviously, as Lizzie mentioned, is leveraging resources offshore to accommodate the time zone. Or do you look to automation, which is one of the poll questions, or partnering with one of your providers to leverage a scale model that can perform those functions in those U.S. hours before Asia obviously comes in? That has a very short window. So I think that's key. And what we've been hearing from a lot of these discussions is really looking to that scalable, automated solution and partnering with, you know, your brokers or providers to be able to perform those functions, hopefully in the US hours, to prevent the dreaded conversation of having your staff coming in on a early Saturday morning to confirm allocations.


I think the second element that that's really resonating and transpiring is obviously there's this the operational element of T+1, the settlements, the trade matching, the funding of the FX, but increasingly the impact to the portfolio managers or the investment team in this lifecycle, really looking at how will the funds positioning be impacted, whether you have holidays or rebalances from a T+2 equity market into a US market on T+1 fund subscription life cycles that are conditionally T+2, and what are the flow on impacts of the portfolio and how manage is actually going to position those portfolios. And we'll probably touch upon it as we talk a little bit more about will they be pre funding will that they overdrafts to sort of facilitate and meet that mismatch in global markets. And I think increasingly the investment impact or the impact of portfolio managers is resonating as well as just the operational impact.


Speaker 1 Right. Thanks, Kia. Members of the panel, I suggest we start taking. Or should we say, address some of the questions that are streaming in? We have quite a few. Shall we tackle the big one that came, with quite a detailed scenario? I mean, I think it raises questions around, breaks. And I think there's also, prime broker disaffirmation issue embedded in there somewhere, somehow. It's really about what happens in the breaks in settlement and discrepancies and the timezone mismatch. I know every firm has their own idiosyncratic patterns, but just if we can sort of step back and look at a broader picture here in this question, any help we can offer to our members, maybe you can go to Ignatius. Ignatius, looking at the question was sent earlier. Any thoughts around that? Ignatius you are probably on mute.


Speaker 4 You are on mute Ignatius.


Speaker 5 I'm sorry about that. Yeah. So look at breaks. The only way that, you could take care of the breaks, is if you want to do that. Especially in the Asian market, if there's a break in the US trades, has to be addressed by automation. So, in other words, as soon as the trade has been completed and I say, let's look at 4 p.m. East Coast time in New York. The day is completed and now you've sent the trade details with the allocations to the broker. So you've sent it at 4:30 p.m. East Coast time. And, within a minute or two, you would know if there is a break or not, because the brokers will respond back. Mind you, remember, the brokers also under pressure here because they are trying to get the process completed too, at a reasonable time so that they would be ready to generate those regulatory reports that they have to send out at 9 p.m. East Coast time on credit.


So they have to also ramp up their process, to be able to, make sure that the matching is completed. So you know that the trades have been matched. Now, if the ones which are mismatched is really what you need to take care of. And so there would have to be some way for the, for the asset managers to be able to address that. And of course, being in Asia, it would obviously be early in the morning. And so because of the time difference, somebody would have to look at those and by, say, 8 a.m. would be able to fix those mismatches of the errors on their side and send it off, for full matching again and get it all processed. That's how I see this happening. So automation and transparency is the key piece there. And so that's what I would recommend that the way the process works, just bringing in more resources and making it another manual process it's not going to be scalable going forward.


Speaker 1 Right. Rest of the panel. Breaks. Any thoughts? Any other perspectives?


Speaker 4 Yeah, I mean okay. Just to offer what? I mean, a break. I mean, I'm trying to understand the question, but a mismatch in terms of trade economics obviously will happen around that time when you know that information and confirmation process happens and a break could happen and could exist post, you know, that that cutoff that's been mandated that, you know, towards the end of US day. And this is where I, you know, that global positive book model comes in handy. And I know Ignatius talked about but possibly, you know, in Asia, start of day kind of dealing with that. The one thing that to note is, you know, when I talk about a follow the sun model that's in place that works, it is not just one where the fund managers are available, because the reality is to resolve a mismatch or a break, you actually need the other party to be on the other side.


So if you are resolving a mismatch with the broker, if you are resolving a mismatch with a custodian for settlement, those parties actually need to be available and operating in those time zones. And this is I think this T+1 ultimately I think will push a lot of players to move into that type of model where a manager is asking their brokers and their custodians and their providers to be available, to be able to continuously try and address some of these mismatches and those breaks that you see. I guess last but not least, I am preaching to the converted here, but STP allows you to reduce those. Frankly speaking, STP technology straight through processing allows you to reduce those. But where those exceptions exist, you need players to be there, available in time zone in the market to help you do that. So even if you had people here in, you know, in Singapore or let's say for argument's sake, in Australia, they still need, you know, the counterparties and the custodians, etc., to be available to be able to resolve the break and move forward.


Speaker 1 Thanks, Abdel. Before we move away from breaks. Any other thoughts, Lizzie?


Speaker 2 Yeah, sure. And and I'll just add to that when we when you start to prepare for this, if you kind of take a look and the kind of a recommendation standpoint, when you kind of take a look in the T+2 market, what are your exceptions on T+1 and what are your exceptions that are left over on T+2. Theoretically right. Those exceptions from T+2 are now moving to T+1. So those can potentially double. But if you're kind of reviewing what's happening am I mainly think at the time mismatches. You may see trade economic breaks. But are these things that I can prepare for ahead of time with the different brokers to say, okay, let's update our asset size. All right. So there's a little things you can start to chip away at to start to reduce those, break numbers on T+1, just to give kind of another recommendation. And we to look at.


Speaker 1 Right. Thanks Lizzie. I guess a related issue to that, is when the case where a prime broker might decide from a trade, say for risk management reasons, I know the industry in the US is still working through the issues, but I wonder if members of panel can just maybe, signal the issue for the benefit of the audience. Perhaps we can go back to Lizzie and maybe Kia, if you have any thoughts on that issue. Lizzie, what is JP morgan's view on this issue?


Speaker 2 Yeah, sure. So this is actually still an ongoing conversation. On our side and industrywide. So there hasn't been a kind of official statement that's made. But if anyone does have any questions, I'm happy to kind of take that away. And once we have more information, we will of course look into it.


Speaker 1 Yeah. And I think it's an issue that's been mentioned elsewhere. Right. It takes an ecosystem of village to support everything we do as fund managers. There's a lot of, code dependencies we depend on. Our counterparties, our prime brokers, custodians, our friends all across industry, to come together. So I think it's good that we are coming together using this webinar as a channel, getting the word out here. Kia, any thoughts from you?


Speaker 3 And not specifically on the prime side, but I guess going back to the mismatch, and that topic, I think, you know, I definitely echo what Abdel said in terms of that global reach and that global partnership or ability to not only resolve, but have an extension of your business or fund management team in those global locations, not only for issues from allocations, which that little said automation can really alleviate. But then the flow on of that and when you look at currency, making sure that the trade related effects is also done as close as possible. You know, one of the inadvertent things from, you know, the move to T+1 is, well, it's intended to reduce settlement risk in, in the equity markets if potentially going to increase settlement risk on the currency side where you come across CLS cut offs. And so, you know, what we're really saying is, is really that all in one complete front to back solution where you can not only execute the equity, do your trade allocations and matching, but also do the security related FX and try and make that CLS cut off. Obviously if you don't make that CLS cut off, I think midnight CT that will move that trade into a bilateral settlement and obviously bring its challenges as well. So really focusing on that front to back, automation, STP to cover all those elements before Asia wakes up in the morning to have a fully funded trade.


Speaker 1 All right. There's plenty of fishing boats in there. Yes.


Speaker 5 Can I just add something, to this discussion? Yeah. You know, to touch on what Lizzie just said about the whole SSI issue. When I was on the trading desk, 80% of our breaks after we completed the match happened at settlement. And that was mainly because of SSI issues. And the industry still places that. So even if we do the matching right now, of the economics, SSI is predominantly are not matched yet. And so we still face that break even after the matching is done. And that usually would happen on T+1, right. So the now the goal is for the industries to minimize when the SSI breaks. And so my recommendation is as far as possible to match on the SSI also on T along with the economics. Now there are issues with that because the brokers system which does a little office space matching the economics, is a separate system from their SSI component. So somehow that needs to be tied in. So that way the asset managers can also send along the details as part of the SSI and the economics together so that the matching could happen.


The industry is slowly moving in that direction. FIX supports that. The FIX protocol I'm talking about which is predominantly used for trading. Now the post-trade these FIX 4.4 and higher version of FIX can support that SSI match. And that is that becomes a very critical piece, because that eliminates a lot of the mismatches that happen on T+1, which is what Lizzie was bringing up earlier. That's something I wanted to add. And also the other piece I wanted to just add  T+1 is not going to go away. The industry is definitely going to move towards T+1 at some point. So we need to figure this out. The industry needs to figure this out at some point. You see that India has already gone to T+1. They have to figure this out, use the technology to bring that and get it to tie into the whole financial process. So we truly bring in STP the whole process.


Speaker 1 Ignatius I think you made a very important point, which is, I think one of the incentives, to start this automation process is to note that actually the rest of the work is not that far behind. India has been mentioned. Our AIMA teams, my colleagues around the world report that we're having similar conversations with regulators in EU and other parts of the world. So it's just a question of time. I think we'll get there, even if it's under pressure by regulators. Now let's, tackle some of the questions that's due. They are coming in hot and fast. Should we bunch up some of the questions, members of the panel. So there's a question about CTM solution. So question about is CTM solution a must to facilitate T+1. Is that the only automated solution? Now I know we have vendor specific, platform agnostic, but, just your thoughts around that. Members of panel.


Speaker 5 Well, I can jump into that right away. Or I can tell you, CTM is not the solution. We have NYFIX Matching. That's something that's offered by Broadridge, and that's a FIX based solution. And the reason I was talking about the whole FIX based solution is CTM cannot match on the SSI piece. And I know that because I used CTM for a very long time. I'm not here to, bang on CTM. All I'm trying to say is that we need to look at solutions that can give us a complete overall package and not look for separate different components that then tie together. We are looking for STP and so there are other platforms out there. And FIX definitely made its way through. It's an open standard, open source out there in the industry. People can look at that and use that for all stream.


Speaker 1 Okay. Abdel, Kia, Lizzie?


Speaker 4 Yeah. Ignatius. I was about to. Yeah, I was about to add. I mean, we are a middle office provider to many players in the market. And so we use a multitude of solutions. And I do agree with you I think the debate shouldn't be about products and solutions. But the reality is it needs to be STP and that that is the key thing for me, right? I mean, whether it's the matching of trade economics, whether it's bringing in the SSI and reconciling them and matching them, I think it should be about making sure that whatever solution you pick ultimately allows you a straight through processing all the way through. Look, I, I've been in this middle office business for 18 years myself, and I have used a multitude of solutions, and there are some really good ones out there. And so, as I said, the focus should be on ensuring that you deliver on, on a straight through process, because the shortening of settlement cycle just doesn't give you a big window to resolve exceptions and successfully settle your transactions and get your funding, you know, to trade the following day. So straight through processing is the key.


Speaker 1 Right. Okay Kia? And then we go to Lizzie. Okay.


Speaker 3 Yeah, absolutely. Look at agnostic again. It's that SDP. It's the automation and it's the full life cycle. Right. So not only just focusing about the equity or the underlying security but following that through. So from execution to matching to SSI to security related FX, you know, looking for a solution that covers that life cycle, I think is key. You know, outside of that, you're introducing, you know, multiple disparate processes or solutions or technology, which is not efficient, as we talked about, that the market is changing. It's all going to T+1, you know the EU and UK are having consultations. So really looking at that infrastructure and that solution front to back is going to be the key to success and scalability as marketable.


Speaker 1 It just reminded me the UK is no longer part of EU. But yes, they're all jurisdictions that will soon move to T+1. Thanks, KIA. Lizzie just wraps the discussion on the CTM.


Speaker 2 Yeah. Of course. You know, again, as everyone mentioned, it's also very important, right, to look at the bigger picture. If I get the execution right. Okay. I can look at this at stages. This part is automated. Now I need to work on my post-trade allocation process. So it doesn't need to be kind of an old one big bang approach, right. Because you might not be able to do that immediately, but you definitely have to have a plan that addresses that full end to end lifecycle.


Speaker 1 All right, let's move to some other questions. Further down the list. So just a reminder to all members. You're listening to a broadcast by AIMA on T+1, for the US and other North American markets. Please send in your questions. The panel will be happy to take questions. As you can see, we do have a very strong lineup from all across, all segments of the industry. Very, privileged to have all of you joining us today. Let's move on to the next set of questions. And I think the questions relate around specific timing. So there's a question around Friday night cutoffs. What is the plan for Friday night cutoffs? Probably means we have to spend more time to office before we here for drinks. Would this be Asia Saturday morning? Does anyone want to address the question?


Speaker 3 Unfortunately, in Asia it’s Saturday morning. Unless someone can change timezones. Yeah, that's one of the main, you know, operational challenges that, you know, we're hearing very, very clearly from a lot of our, you know, clients and industry groups as we have these discussions. You know, Friday, 9 p.m. New York is a Saturday morning. Who's coming in to resource that to check those overnight trades, affirmations and mismatches that we've talked about. Obviously from a FX perspective that there's not much liquidity on a Saturday morning in APAC. And that's probably a bit of an understatement. So how do you look at the currency component of that? And that's definitely a problem. And maybe taking that one step further is where you interpose a holiday in the APAC market that really makes, the settlement and the funding of that transaction even more complex. So, unfortunately, hate to be the bearer that that it is Saturday morning in APAC.


Speaker 1 Any thoughts from others? Thanks for that sobering assessment, Kia.


Speaker 5 Yeah, I mean, I totally agree with Kia on that. The good thing is that the person who's monitoring this on Saturday morning, their week starts on a Tuesday morning then. That's a silver lining. Of course, not much of a silver lining, but at least, there's that. But of course, the Kia said. The fact is that somebody has to look into this on Saturday morning.


Speaker 4 Yeah. I was about to add, I mean, I think a number of global organizations have had that Saturday somewhat manned. Right. And I think what has really changed with this US T+1 now is, is if you used to have the luxury of deferring some of that to our Monday, right, in Asia. Right. But you don't have that anymore. Right. So you do have to close your US day on a Friday. Call it 9 p.m. US time. So you have to have people here and on Saturday morning. But I am frankly speaking and again talking from experience, I have worked with a few global organizations and Saturday tends to have resources in it for a number of reasons and mainly due to, you know, from an accounting perspective, a US, you know, end of day now, for instance, and things like that. I think what this brings in is you have to maybe do it with maybe a greater level of scale. Because this comes in and you have this body of work now that you need to deal on start of day. I always say Australia is not a bad place given the time zone. And they get us started in Asia. But yes, I think organizations need to cater for that Saturday start of day. It poses a number of challenges. It depends which location you're picking up. There are a number of labor laws that prevent you from doing that and so on and so forth. But the reality is you kind of have to there is a body of work that needs to happen at that time, which is our Asia start of day. We have been toying with time zones for a number of years, and I'm sure this one is another one that we need to we're going to need to manage in region.


Speaker 1 Okay. Right. Something we just have to manage. I think that's very right adult about it. Let's keep going. We've got a lot of questions. So next set of questions, maybe we can have a quick answer from the panel. Pros and cons of CNS versus bilateral settlement. Any thoughts? Different views, perspectives.


Speaker 3 Well, I'll take that one, obviously. Yeah. So, I think, CLS, you know, nearly interpose is itself like a DTC and obviously reduces counterparty risk. I think the real hamstring of this is going to be meeting the CLS cut offs for, you know, T+1 settlements, which I mentioned sort of around that European midnight time comes down to sort of 6 p.m. New York. So again, you know, bringing in to all the upstream lifecycle of how do you get your execution matching affirmation and effects executed within that window so that you can avoid CLS or sorry, you can avoid bilateral settlement. So again, that full lifecycle in a very short window is the key to make that CLS cut off. Obviously from a bilateral perspective, you know, you will or may have, settlement risk limits or risk implications from your counterparties. How are you going to manage those? And obviously the associated risk with that. So definitely an area that on the currency side is being actively discussed. At this point, CLS is not changing those cut offs, but there is a lot of industry engagement with them to say, you know, how that might fare. But it's certainly not going to be before May 28th from what we're hearing from them. So again, you know, echoing the conversations that we've had, it's really being able to automate and combine all elements of that trade and the related effects in a short window to make that CLS cut off time.


Speaker 1 Right. Thanks again for taking that for the team. Any other thoughts on the same question?


Speaker 4 No, but more from a more from a best practice perspective. You know, we historically moved from bilateral to CLS for a number of reasons. Very good reasons. I totally agree with Kia. I think I think there is definitely active discussions around cut offs and what they mean and whether they need to move. I'm not so sure that, you know, that will bring into question the good reasons we move to CLS for, frankly speaking, bilateral could be like that back up. Right. When, when. And we still, I think players in the market still have access to it, by the way. But I'm not necessarily seeing a like a reason to it's you have a solution. You know, you kind of have to adjust it to an extent to accommodate for these regulatory changes and shortening of settlement cycle, but I'm not sure we will question that. Like that would be my two cents.


Speaker 1 All right, let's keep going. This is like live radio show. The questions just keep coming. I think you guys are really bring out the best in our audience. Just lots of questions. Should we move on to the questions around, auto matching trade files? I suspect, this question could be for Ignatius. Can trade file be automatically sent to custodian by Paladyne and NYFIX automation.


Speaker 5 Yes it can. That's this very quick answer. And that's what we pride on. It's all automation. And then we can send it off, which is the next phase. And all this can be done on real time. So as soon as the trade has been matched, we can send those off to the custodians under the prime.


Speaker 1 Okay, I'm quite sure this wasn't a question sent by one of the team members, Ignatius, but that was. That was a good question nevertheless. Shall we move.


Speaker 5 On to my books? I like those questions because, like, pushes my hand, which is the value that NYFIX Matching brings in. But that's all right.


Speaker 1 It's all right. It's all right. We own a business of selling something was, you know, always looking for something. Anyway, so when we do it in a proper and transparent manner and it benefits all members. There's a question around bonds. Will bonds be, eligible for settlement in both DTCC and Euroclear. While the ECI. I guess the question is, while Europe is still on a T+2 basis, how will this be addressed? The question for the panel. Abdel, do you have any thoughts on that? Bonds? Euroclear?


Speaker 4 Yeah, I am not aware. I am really not aware that the transition to US T+1 brings in any changes as it relates to the place of settlement itself, frankly speaking. So, I'm, I'm not positively responding to that question as. And you can still do that because I'm not aware that there is any impact or change to your chosen place of settlement as it relates to bonds, just because of the shortening of settlement cycle.


Speaker 1 Okay. Meaning it's due subject to T+1, right? Yeah.


Speaker 4 Yeah. Irrespective of what web, what place we ultimately want to settle, I don't necessarily think that, but if I will offer, care whether I know it, maybe it's anonymous submission. I'm happy to take that question. I think our details are available to the participants. If there is a follow up, I'm more than happy to take it on.


Speaker 1 Okay. Yes. We will have the speakers details at the end of the presentation. So, any members of the audience feel free to reach out to the speakers directly for any follow up questions. Lizzy, did I see that you want to chime in on this question?


Speaker 2 Yeah. Of course. I mean, I would agree with Abdel on that one. There hasn't been any kind of communication on, you know, if you decide to settle in Euroclear versus, you know, DTC does that impact the settlement cycle? I would offer up kind of one additional point. But I am happy to check on. But if you change the settlement location post-trade. Right. So there are some instances where you might send down a trade in Euroclear, but then you want to change it to DTC, right? So there may be some implications there. That, you know, I'm happy to follow up on.


Speaker 1 Okay. I guess a related question to that as a follow up question. So does this mean because it's not DTCC, would this incentivize people to set up credits or bonds in Euroclear? I guess the answer is the same, right? The same analysis. Yeah. Okay. Someone posted a comment. I will read it out just for a good laugh. I think it's something we address. No one is working on Saturday morning at asset manager. This is ridiculous. I think we did tell the, we did tell the SEC that, but you can see that in writing on the website. Not in so many words, right? Another set of questions. We heard that some APAC clients have been told by brokers that they could upload on T+1 12 p.m. Hong Kong time. Have you heard of any exceptions for the international hedge fund community? I'm not quite sure I understand the question, but I guess members of panel, you can see the question on the screen.


Speaker 5 Yeah. I have not heard of any exceptions. Okay. But then again, I don't know if the rest of the panel have heard anything.


Speaker 1 No, I hear.


Speaker 4 And I think we that that question never around. Are there any exceptions granted? I am absolutely not aware of any exceptions granted in terms of the mandate to allocate all your trades on, T US day at 7 p.m., affirm your trades on T at 9 p.m.. I'm not aware of any other exceptions. And I know the question is asking about a the need to upload at 12 p.m.. And I'm wondering for what purpose is that? Is it for settlement purpose? And I'm not I'm not clear, but I'm not aware, frankly, that there are any exceptions. Granted as it relates to to the mandate here to move to US +1 and throughout the process.


Speaker 1 It will be very worrying if the exceptions for the hedge fund community. But anyhow, we will define what is a hedge fund community. I imagine Wall Street Journal in the Financial Times will go to press on that. It's not very good optics. Yes. But yes, if there are any exceptions or any workarounds to share with everybody is online. Well, I guess swaps are not in scope. Would I be correct? So are we going to see more trading moving to swaps for example? Ignatius?


Speaker 5 If it is an equity swap, if it's an equity swap, it should be in scope, right? Because you can trade know like a CFD. You know, the total return swaps of contract for difference. It should be because it's treated initially as an equity stock equity trade.


Speaker 1 Okay. Does it matter whether it is cash settled or not? Or that it should be the same?


Speaker 5 It should be treated as the same. It's just that. Yeah, it's going to be a possibly a tripod in many of the hedge funds in Asia. What I've noticed is that they're typically, the executing brokers, also the clearing broker, they they're not give ups. And so to me, if you're doing it. But I didn't realize. Sorry, I think this, but wait a minute. CFD is mainly done in Asia, or in, in Europe. So those trades will not comply with the T+1 regulation. Right? I mean, this is only for trades that I've done in the US which is a T+1.


Speaker 1 That was my starting point. I would have thought so, but.


Speaker 5 Yeah.


Speaker 1 Yeah.


Speaker 5 Yeah. So I think that what I said.


Speaker 1 Okay.


Speaker 4 I was I wasn't about to answer that question directly, but I was about to make a suggestion that there is a published list of asset types that are subject to T+1. And so if that asset is not there, then that, then it isn't. There is a very comprehensive list of assets that are in scope for US T+1. And it's published by the way. So I guess whoever asked that question is looking for an answer about that one or any asset type. They should they should refer to that.


Speaker 1 Okay. That's helpful. So what do you say is there's a positive, close list, right. If it's not on the list, then it's out. Got it. Okay. I believe in the AIMA guide. That list is also published there, but obviously we should always check real life data. Just wishes updated, but thanks for that. Well, let's say in the time that we have let’s move to discuss something, and get the panel's views on really what are the next steps one measures should be taking now. I want to ask what happens on the 27th of May. Was it 24th of May? Sorry, depending on which market we're looking at. But let's assume is the war going to end on that day on that night. What if that breaks the transactions don't settle. What happened? Maybe we can use that as a scenario and work backwards. What should people be doing today to start really seriously preparing for this? Maybe we can start with Ignatius. Ignatius is going to take us forward, and then I'll get.


Speaker 5 Absolutely. So I can assure you on, on the 27th of May in Canada, which would be the first day that they would move to T+1 and the 28th in the U.S. there will be breaks and there will be issues because this is, totally a new, area there, a lot of moving pieces and, every moving piece, though the SEC has felt that they have, covered it. There will be teething issues and I definitely see issues coming up. But needless to say, the industry needs to be prepared to the best that they can. And, again, go back to automation. They definitely need to, put in some, level of automation and bring in STP. So that way the, transactions are flowing through seamlessly. And, any teething issues that come along the way that can be fixed and move along. So I don't think the industry is going to come to a grinding halt. Not at all. But, there will be issues that people will have to work around that, you know, try to mitigate the issue and move forward. That's how I see that happening. And eventually, it will all get smoothened out. It could take two months, three months. It could take longer. I don't know, it all depends on how serious the issues are. And then they would go with that.


Speaker 1 Okay, Ignatius, let's, thank you for that. Let's go to Abdel. What should we do? How to prepare. How do we stop the world from ending?


Speaker 4 Well. I think we have trades failing today in the current setup. So there will be failed trades on like we have today. And I think what should the managers do between now and then. You know we covered a number of the challenges that we foresee. So targeting to target to address those is important. Secondly, you know if you haven't done so make sure that you are as ready as you can be. I think you can actually touched on that one. Make sure you are as ready as you can be for that date, but make sure that you don't do it in isolation. Make sure that you check in with your brokers, with your custodians, with, your counterparties, your clearers, to make sure to check on their readiness as much as you check on yours. Because, as I said, you can't be ready without, you know, your partners in the market. And I think we talked about the importance of automation and straight through processing.


And I'm assuming that the community hasn't necessarily waited for T+1 to invest in that. But it's just an opportunity actually. Now, you know, regulatory driven to invest in the current op model that the managers have, be it the, you know, the throughout the life cycle be it at the execution level, matching settlement and so on and so forth. It's an opportunity to review and revisit that. You know, we always sometimes need that that push. And I think we should, you know, I think the manager should use that as an opportunity to, to revisit that both the infrastructure that they have to guarantee automation and straight through processing, but also , the operating model that they have in place, revisit the operating model that they have in place to accommodate for it, that there will be my recommendation.


Speaker 1 All right. Thank you. Abdel. Let's go to Kia, and we'll let Lizzie have the final word on this question.


Speaker 3 Yeah. Look, I think it, it's looking at that operating model. And at this point really resourcing and technology building technology is going to be quite challenging. So I think it's looking at where those pain points are. Is it standardize and really looking at a ordinated front to back solution where you can partner with your providers, as Abdel said, to really alleviate those constraints. I do think the second point that I'd flag for everyone is to really look upstream and, you know, have that discussion not just operationally but from the portfolio perspective and the investment team and say, how is this actually going to impact the fund and how the fund is management managed? Do we need to increase cash balances, for example, do we need to pre fund the how would the portfolio management team potentially going to view a rebalance across the globe. So I think a lot of those questions potentially have been swept aside as we focus on the operational elements. But certainly taking a look upstream in the lifecycle, it's going to be very critical as well, to prepare for, for my.


Speaker 1 All right. Lizzie. Thanks Kia.


Speaker 2 Yeah. Of course. I mean, just to echo everyone's sentiments, this is a team effort, right? So everybody's in this. We're all working towards kind of the same end goal. You know, the 28th is going to be a big day, right? That'll be a double settlement day also. So, it's really key, you know, that you do get in touch with your brokers, get in touch with your vendors, your middle office providers, whoever it is, and make sure everybody is on the same page. And if you have any questions. Right, everyone, everyone's available to kind of help, and guide and guide where necessary. And then also just one additional point. It doesn't stop there. Right. So as we kind of mentioned throughout this call, market settlement cycles are shrinking globally. Right? So and this also gives you an opportunity to automate a, you know, rethink all of the operational workflows and processes that you have out there. So don't just stop on May 29th. Right? If you if you've done everything you needed to for the DTC, T+1 settlement cycle, keep it going. And keep kind of reducing those manual processes that you have out there.


Speaker 1 Right words from the wise. Well, members of the panel. Thank you very much. You have given, our managers and members plenty of food for thought. I think it's fair to say come the end of May, right through to early parts of June, we shouldn't be booking any holidays. We'll be chained to our desks. For many of us. And not going anywhere near a bar on a Friday night, right? Unfortunately, we are out of time. I know we can keep going. We might have to do a part two at some point. If, conditions call for it. I want to thank all members of the panel for joining me today. I want to, pull up the contact slide. There's a slide of the contact details, members of panel. So, feel free to reach out to any members of this panel, for any follow up discussions, who will post the materials and a replay of this webinar on the AIMA website after this call. Before we go, I want to give a shout out to upcoming AIMA events.


As I mentioned at the outset, we are a very active bunch. We conduct about 100 such webinars like the one you are, experiencing today throughout the course of the year. We also have other flagship conferences. The first one that's coming up after our China conference. The next one up is Singapore on the 20th of March, where AIMA will celebrate 20 years of, AMA in Singapore. And we have a Japan Forum, Australia. And then finally, to round the year, we have our APAC forum in Hong Kong. So that's on the screen in front of you. With that, thank you all for joining us. As we, finished just bang on time. Thank you all for coming. And I will say goodbye for now. Be well.

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