Investment Operations

T+1 Accelerated Settlement

T+1 Settlement refers to recent market initiatives aimed at amending current capital markets settlement cycles. The cycle is currently at T+2 in most major markets with policy makers looking to accelerate this to T+1.

In the UK and Europe, conversations around T+1 settlement continue at a pace, and the IA is active participation on the UK Accelerated Settlement Taskforce.

The IA is supportive in principle of a move to T+1, but there are particular challenges relating to the following areas.

Trade matching
FX liquidity availability
FX settlement - Payment vs Payment netting tool availability

Funding and cashflow management
The impact on ETFs (Exchange Traded Funds)
Inventory Management
Securities Lending

The IA has created a detailed T+1 overview, detailing how current processes are impacted and on what firms are doing to address them. We are working with members on UK T+1 advocacy, indicating preferring alignment with the EU, if possible, but noting differing views on what should happen should provisional UK and EU dates be too far apart.

The IA also continues to engage with key market stakeholders such as CLS and DTCC, and has communicated regularly with members through working groups and surveys, keeping them updated on key market updates and allowing firms to benchmark their position.

Next steps for the IA:

Continued member engagement in the lead-up to the May 2024 transition date for North America.

Engagement with the SEC on challenges around FX PvP netting and extended settlement.
Collaboration with the UK Accelerated Settlement Taskforce and members to establish a UK
position and roadmap to T+1 Settlement.
Responding to the ESMA call for evidence due 15 December.

EMIR

EMIR 3.0

The IA continues to engage, via EFAMA, on the EMIR 3.0 proposals to update the European Market Infrastructure Regulation (EMIR). The proposals seek to strengthen the supervisory framework of the EU clearing ecosystem and increase the attractiveness of EU counterparties (CCPs).

The IA has particular concerns regarding proposals to introduce an Active Account Requirement, which would require EU market participants to clear a proportion of their transactions in certain derivatives at active accounts at EU CCPs. While the EU views the proposals as countering risks to EU financial

stability by reducing concentration of clearing at some third-country CCPs, the IA –along with several other industry bodies including EFAMA, AIMA, ISDA and the FIA – finds that these proposals could be harmful to the competitiveness of the EU, would increase costs and could potentially hamper our members’ ability to provide best execution to clients.

The IA is therefore supporting EFAMA in its advocacy in Europe on this issue as the industry looks to seek a compromise solution, including an initial requirement for an ‘operational account’ only, with any further introduction of requirements to be introduced only after further cost-benefit analysis.

EMIR Refit

EMIR Refit is a change to the existing EMIR transaction reporting regime for derivatives and brings about an expansion of the number of reportable fields from 129 to 204 (203 for Europe), with a transition in April 2024 and September 2024 for Europe and the UK respectively.

Our members approach to EMIR is split, with some members conducting reporting on behalf of their funds and clients, and some member firms opting to delegate reporting to the brokers whilst monitoring what’s being reported. Amongst the issues include data sourcing for some of the particular fields, interaction and engagement with brokers and clients and ambiguous wording around some of the requirements. The IA is working with other sell-side trade bodies, the regulators and members to establish best practice as it comes to some of these initiatives.

The IA is running working groups for both delegating and reporting members, to assist them as they gear up towards the April 2024 and September 2024.

Further information:

Alex Chow
Investment Operations Policy Lead
alex.chow@theia.org

IA Website Hub Page: CSDR, Regulatory Trade and Transaction Reporting,