Middle- and back-office upgrades needed ahead of T+1, research finds

Report finds that 81% of US and Canadian brokers and banks are either using manual processes or home-grown systems.  

By Chris Lemmon

Firms must address inefficiencies across the middle- and back-office and increase automation ahead of a move to T+1 and T+0, according to research from Torstone Technology and Firebrand Research.  

The report, ‘The Move to T+1: A business case for automating the middle-office’, highlighted the regulatory pressures to move to T+1 in North America in 2024, and the scope of the practical challenges for firms.  

The research estimated that 81% of brokers and banks active within the US and Canadian markets are either using manual processes or home-grown systems to support their post-trade processes. 

Beyond post-trade securities operations, the research also noted that T+1 will require changes across firms’ wider operational flow, including front office systems, ETFs and mutual fund processing, corporate actions, reference data, and trade confirmation systems.  

By investing in such processes, firms can expect increased confirmation matching rates, faster exception resolution and a reduction in settlement failures, with the ability to process higher volumes of electronic order flow.  

Brian Collings, CEO of Torstone Technology, said: “As the move to T+1 gathers momentum, firms will find that failing to adapt to industry-driven market structure changes will incur significant risk both operationally and competitively in a challenging market. Manual processes and batch processing are simply not compatible with the shift to shorter settlement cycles – firms need to update and automate their middle- and back-office systems or face substantial operational risk.” 

Virginie O’Shea, CEO and founder of Firebrand Research, added: “While firms absolutely need to prepare for the move to T+1, greater automation and digitisation has been topping client agendas since the pandemic and the subsequent pressure on resources. While T+1 is a clear impetus for firms to address inefficiencies, the benefit further automation will bring to competitiveness and client service cannot be overstated.”