Preliminary data and industry feedback tells us that T+1 has been considered a success thus far. What were the key contributors to the successful implementation in the US?
The most important factors in the seamless execution of T+1 were the three Cs: collaboration, coordination and careful planning. DTCC took the lead in driving this initiative because we recognised the tremendous value it would deliver to the market, including reduced risk, lower clearing fund requirements and improved capital and liquidity utilisation.
Over a three-year period, we worked closely with a broad cross-section of the industry to rigorously test their systems and identify potential issues. This ensured readiness for T+1, but it also informed new approaches to communication and troubleshooting. In addition, T+1 shined a light on the interconnectedness and interdependencies of the markets and the criticality of ensuring resiliency and business recovery, which came into stark relief during the conversion to T+1.
This insight is helping to shape how we’re advancing initiatives like implementing US Treasury Clearing, promoting accelerated settlement globally and advancing digital assets.
Did you have some ‘worst case scenarios’ planned out for the transition?
Risk management and resilience were embedded into every aspect of our planning because we needed to be capable of solving potential issues or disruptions that may have occurred. We always expect optimal results, but we plan for the worst so that there are no surprises when we execute. The T+1 Playbook and client tabletop exercises we coordinated helped us understand, learn and, ultimately, strengthen our response in the event an issue occurred. As we look ahead, we’re going to continue leading on accelerated settlement globally by sharing our learnings with markets in the UK, Europe, and Asia.
And did you have any indications leading up to the date that it would have gone this well or was it not until the first day(s) data that you realised just how well the entire industry had done in preparing for the switch?
We were confident in our preparations, but we also recognised there were a series of milestones that had to be achieved throughout that weekend before we could consider the conversion a success. For instance, we saw affirmation rates increase to over 90%, active adoption of TradeSuite IDs and greater than 99% coverage on industry testing. This, along with other metrics that we were tracking, were important indicators that we would have a smooth transition.
Do you think the liaison work around T+1 has resulted in DTCC having a closer relationship with custodians?
It certainly has strengthened our stakeholder relationships and deepened their trust in us. Clients were very complimentary following the conversion, particularly around our client-centric approach to outreach, engagement, support and communications. We greatly appreciated the partnership with market participants, including the custodian banks, who played a key role in driving higher affirmation rates.
DTCC’s vision is to serve as a strategic partner to the industry, and this historic achievement builds momentum as we execute other priorities. T+1 demonstrated that we can successfully manage large-scale, industry-wide initiatives. We’re going to build upon this to coalesce, galvanise and lead the industry in partnership with our clients to make markets safer, more efficient and resilient. Our ultimate goal is to deliver positive benefits to the end investor, whether that’s through better price discovery or reduced frictional cost.
After the successful implementation of T+1 in the US, what role will DTCC play in the move to accelerate settlement cycles more widely, such as in Europe and the UK?
With North America now operating on a T+1 cycle, many other jurisdictions are contemplating plans to accelerate settlement, including the UK, EMEA and APAC markets. DTCC will continue to lead on T+1 globally by sharing our learnings with these markets so they can drive their own planning. For example, we’re an active member of the UK T1 Task Force, we have provided detailed responses to ESMA’s T1 Call for Evidence and we’re partnering with the industry in Europe. We have also responded to ASX’s T1 consultation. In addition, we’ll continue to work with the industry to advance risk reduction, resilience, and capital efficiencies by turning innovative ideas into solutions.
US Treasury clearing is arguably the most significant market infrastructure change in the last decade. How confident are you that the implementation of this new SEC mandate will go smoothly?
We’ve been engaging with the market on Treasury clearing for more than a year, and the feedback has been instrumental in shaping our strategy. In turn, we’ve been sharing our nearly four decades of expertise in clearing Treasuries. This powerful combination of bringing together industry insights and our experience is yielding positive results for market participants, including introducing new innovations to increase client value while ensuring reliability, transparency and market stability.
Importantly, we feel confident in our planning and ability to seamlessly manage volume increases. The potential opportunity of the Treasury Clearing rule is expected to be around $12 trillion. As of August, FICC cleared an average daily Treasury volume of $8.3 trillion, which was up nearly 11% compared to June 2024. In fact, we recently reached a record one-day peak of $9.3 trillion. We attribute this to higher volatility in the Treasury markets and firms complying with the rule in advance of the deadline.
We’re scaling up to meet industry demand and testing our throughput and resilience to ensure the safety and resilience of the marketplace. We also launched two public calculators, GSD VaR and the Capped Contingency Liquidity Facility, this summer as part of our broader plan to provide more transparency into our risk management calculations.
It’s nearly 10 months since the Securrency acquisition was completed. How much progress has been made in advancing what is now, DTCC Digital Assets (DDA), and what are the strategic priorities for DDA?
The acquisition has been very successful and opened new doors for us to listen to the industry, begin forming meaningful relationships, strategise together and ultimately deliver solutions. We’re going to lean in hard on tokenisation and provide global leadership to drive innovation. While the transition to digital markets will take many years, our commitment is to deliver the same level of support and service for digital assets as we do for traditional ones. To accomplish this, the industry will need to work together – and with us – to reimagine processes, transform operating models and create new digital asset services.
We’re also very focused on industry collaboration. With that in mind, we’ve been partnering with two global peers – Clearstream and Euroclear – to develop a framework for establishing standards, procedures, and governance in a digital environment. Our unprecedented collaboration has produced a series of white papers, of which the latest provides a comprehensive framework for digital asset adoption.
We’re also preparing to introduce a DTCC-commissioned sandbox. It’s unique in that, we’re not only offering the infrastructure for the industry to collaborate and advance adoption, but we’re also providing the tools and technology to facilitate the process. And in the months ahead, we’ll roll out powerful, new digital asset capabilities for securities and fund tokenisation, collateral management, and more effective use of smart contracts.
With the prospect of decentralised finance, will there still be a need for market infrastructures in the future and, if so, will they play a different role than they do today?
I believe market infrastructures will be just as important in a digital environment as they are today. With DTCC Digital Assets, we’ve set our aspirations very high. We intend to be the digital market infrastructure of the future, and we’re committed to partnering with the industry to build an efficient digital ecosystem that provides better capabilities, lower costs, regulatory certainty and less risk.
There’s an element of market infrastructure that firms will share in common, but DTCC is committed to standing at the intersection. Our industry position will allow us to provide solutions that drive tokenisation of securities, funds and collateral, support digital assets throughout their end-to-end lifecycle and enable cross-chain interoperability.
The path to digital markets and decentralised finance is through a CSD, which is essential to maintaining the integrity of the common ledger in financial services. DTCC has outstanding ledger technology that can take our services to the next level. With digital tokenisation, we will merge both the existing and new services we offer.
How can DTCC balance the need to protect the security of the global financial system while also continuing to innovate?
I believe that if you innovate effectively, you will reduce risk. DTCC is proving that we can do both effectively. We’re highly focused on innovation, with several efforts underway to embed AI, APIs, cloud computing and other technologies into our solutions, services, and business processes. At the same time, we’ll always follow a risk-based approach without compromising risk management or the safety and soundness that the industry expects of us each day. If you look at the work, we’re doing to leverage the cloud more or advance use of DLT, we’re balancing innovation and risk management in a responsible manner.
What are DTCC’s key strategic priorities going forward?
DTCC is calling 2024 the ‘Year of Execution’ given the criticality of the industry imperatives we’re helping to lead. As I’ve mentioned, the successful T+1 conversion was a key milestone, and next up is expanded US Treasury Clearing and bringing our new digital capabilities to market. Another key initiative is advancing modernisation, which will ensure our applications are future proofed to meet the industry’s structural changes and improve our responsiveness to client inquiries. We’re upgrading our client interfaces and rebuilding our core service applications to create a client experience that is API-based and gives clients access to data how and when they want it.
How can you best sum up your approach to successfully steering one of the world’s biggest market infrastructure providers?
Communication, escalation and acting with urgency are incredibly important to our success. We’re entrusted with protecting the stability and integrity of the global financial system, so we must approach every day focused on seamlessly executing our daily responsibilities while also preparing for the future.
Right now, our industry is experiencing a unique moment that requires a different type of support as geopolitics, macroeconomics, technology and cybersecurity are impacting the operating environment. As a result, firms need – and want – market infrastructures to do more to help them navigate these issues. DTCC will rise to the occasion to meet this challenge head on by serving as a strategic partner to our clients. This will enable us to constantly strive to deliver greater value and become more of an asset to our member firms. We’ll also create the most innovative solutions to solve the operational challenges that are hindering our clients’ success.
It’s a great privilege to lead DTCC, and I look forward to our team delivering for our industry for many decades to come.