FIX plans new message types to help US T+1 migration

FIX plans new message types to help US T+1 migration

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FIX Trading Community plans new message types to help the standards body's members prepare for the US switch to next-day settlement in May 2024.

Laurence Jones, Americas regional director at FIX Trading Community, told Global Investor the standards body is working to complement its established trade allocation and confirmation messages with new message types focused on next-day, T+1 compliance.

New York-based Jones said: “We are actively working with the industry through our working groups to ensure where relevant we enhance our existing messages or deliver new messages that firms could use to prepare them better for T+1. We are moving through internal approvals and public comment to promote a new message which would offer a settlement status for securities as well as cash. We plan to have this completed in Q2 2023.”

US equities regulator the Securities and Exchange Commission said on February 15 the standard settlement cycle for most broker-dealer transactions will reduce to one business day (T+1) from its current two day settlement (T+2) on May 28 2024.

Jones said the FIX Trading Community is helping its members prepare through working groups.

“The FIX Community has many active working groups such as our global post-trade working group and our securities lending working group that are having active discussions about what more FIX can do to help with the migration to T+1.”

FIX, which has a global remit, lists among its members large investment banks Bank of America, Citigroup, Goldman Sachs, JP Morgan and Morgan Stanley as well as US exchanges Cboe Global Markets and CME Group.

The standard’s body’s global coverage is important because some of the main problems posed by the US migration to T+1 will be faced by European and Asian firms, Jones said.

“We also have a very large active community outside of Americas though EMEA and APAC, which are participants who could face some challenges around timezones, FX and funding for a T+1 settlement.”

James Pike, the head of business development at fintech Taskize, said last month US T+1 will present significant operational issues to Asian firms: “T+1 could be a particular challenge for Asian firms trading US stocks because they lose that extra day in which to settle. These firms will have to change their operating models and potentially move to a more of a “follow-the-sun” type of model.”

Jones said FIX Trading Community supports the migration to next-day settlement, adding: “FIX welcomes industry initiatives that aim to reduce risk in the markets and looks to standards, while acknowledging that there are going to be challenges associated with changes, such as the migration to T+1. The good thing is that there are already a large amount of industry standards, and the technology that supports the standards, available today to help the industry with this transition.”

Chris Rowland, global head of custody at State Street, questioned last month the SEC’s decision to forge ahead with the proposed May 2024 deadline, suggesting a later, September implementation date would have been welcome by the industry.

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