FX solutions provider CLS has stated that it will not be making any operational changes to CLSSettlement ahead of the scheduled US T+1 implementation.
The 00:00 CET deadline for initial pay-in schedule (IPIS) will not be changed, however settlement members will be permitted to submit trades until 06:30 CET for settlement that day.
This announcement follows continued growth for the company. BNY Mellon and ING joined the firm’s netting calculation platform, CLSNet, in January, following the addition of Taipei Fubon Bank in December 2023.
The decision has been made following a survey of CLS settlement members, more than 40% of whom—representing approximately half of CLSSettlement’s ADV—said that adjustments to the IPIS may require system development and considerable implementation time. In addition, the company said, such a change would necessitate detailed modelling and analysis for a comprehensive risk assessment.
Alongside this survey, analysis of CLS transaction data suggested that the move to T+1 may have a limited impact on CLSSettlement.
Approximately 1% of the CLSSettlement’s ADV is executed on a T+1 basis, and feedback from asset managers indicated that between 40 and 50% of this could be impacted by the shortened settlement cycle and could settle outside of CLS. More than half of those questioned stated that the majority of their risk can still be mitigated through CLS, even without any changes to deadlines or custodian cut-offs. A further 35% responded that they had not yet decided how to respond to the impact of T+1.
CLS stated that it will monitor the impact of the T+1 transition post-implementation and provide updates to stakeholders at the end of June and September.
It said: “We will continue to work closely with our settlement members, asset managers and the wider ecosystem to explore possible solutions to address any challenges that may arise from the transition to T+1, while ensuring that the stability of the FX ecosystem remains our top priority.”
As the US and Canada near this May’s T+1 implementation date, the debate around introducing a shortened settlement cycle in Europe and the UK continues.
The European T+1 Industry Task Force has published its comments concerning the UK’s recent T+1 report, voicing its agreement with the importance of working collaboratively across the regions to provide “a low-cost, efficient, safe, resilient and integrated post-trade environment which supports globally competitive European securities markets, with high levels of automation and standardisation.”
“We anticipate that alignment of dates will reduce the complexity of implementation projects for firms active across multiple jurisdictions, and minimise scoping issues related to instruments listed, traded and settled across geographical Europe.”
The task force will continue its analysis of a potential T+1 transition in Europe, it said, taking into account lessons learned from the North American migration, its upcoming roadmap of adoption of T+1 in European securities markets, and a potential timeline for the industry to prepare.
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