A new study from Citi shows that 44% of participants believe the stock settlement time will likely be T + 1 over the next five years, according to a press release emailed to PYMNTS.
In addition, the study found that the pandemic posed new challenges, including managing periods of high volatility, the statement said. This, along with the acceleration of efficiency and digitization initiatives, has created an environment in which market players are considering how the settlement process could be changed to reduce risk.
“Through extensive dialogue with our partners and customers, it is clear that there is an increased need in the industry to build resilience, reduce risk and reduce costs; and improve efficiency, ”Citi global head of securities services Okan Pekin said in the statement. “This paper highlights not only the benefits and challenges of a shortened settlement cycle, but also associated emerging technologies and ongoing digitization efforts in the industry.”
The study participants included 15 financial market infrastructures (MFIs) and 400 market players, such as banks and deputy managers. The two groups disagree on several points, according to the statement. MFIs see the benefits of shorter settlement cycles as reduced risk, allowing for lower margin requirements and freeing up of capital. But market participants said they believe greater efficiency in investing and trading is more important.
The study also found that the biggest challenge in achieving shortened cycles, according to MFIs, is the efficiency and alignment of business processes, the statement said. Market participants did not see this as a major factor; most of them saw treasury, financing and liquidity management as the main obstacles to overcome.
Separately, the US Treasury’s Bureau of the Fiscal Service has predicted that nearly all of its payments will be made electronically by 2030.
Read more: US Treasury commits to 99% electronic payments by 2030
The office also wants to ensure that paper collections are more digitized and that there is a 25% reduction in paper volume through the office’s general PO box network by 2024. And the office also wants to implement. sets a new electronic tax collection system for a smooth, customer experience by 2024.