How network managers can stay ahead of the curve

As post-trade reforms and digitization roil securities markets, Derek Yiu, Associate Director of Network Management for Asia-Pacific at RBC Investor & Treasury Services, provides his perspective on opportunities for global custody network managers to help investors adapt to today’s dynamic marketplace.

Intraday settlement cannot be rushed

With India's phasing in of a T+1 settlement cycle for equities due to be implemented by the end of January, and plans by the US and Canada to adopt T+1 sometime in 2024, there is already discussion around the possibility of further settlement compression. Some are calling for the implementation of T+0—also referred to as end-of-day settlement or real-time settlement.

A handful of financial market infrastructures (FMIs) are already making headway on T+0. The Depository Trust & Clearing Corporation (DTCC) is reportedly investigating the applicability of real-time settlement as part of its Project Ion initiative, while SIX Digital Exchange (SDX), the digital exchange owned by the SIX Swiss Exchange, has adopted T+0 in a limited number of use cases.1

A handful of financial market infrastructure are already making headway on T+0

Although progress is being made on shortening the trade settlement cycle to T+1, there are concerns about a rushed introduction of T+0. Even the Securities Industry and Financial Markets Association (SIFMA)—an ardent supporter of T+1—concedes that end-of-day settlement would require “fundamental and costly changes in market operations” and that a move to T+0 would serve as a disadvantage to financial institutions “who are unable to make the investment or lack the scale to compete in such an environment."2

The securities industry needs to be realistic about the implementation horizon for T+0. It’s going to take time to digest the transition to T+1, particularly in light of the decision by the European market—complex and fragmented compared to the US—to adopt a wait-and-see approach to T+1. Obviously, the global preference is for European alignment on T+1 and the current situation may provide an opportunity to revisit the entire trade settlement processing ecosystem. It is clear that there are concerns about global interconnectivity of markets with different trade settlement cycles, including Europe and the Philippines, which has yet to adopt T+2. As a result, network managers need to stay close to this important area. 

T+0 is dependent on emerging technologies

The realization of real-time settlement will be contingent on the industry's willingness to adopt new technologies at scale, including DLT (distributed ledger technology), smart contracts and digital assets. While this will not happen overnight, network managers need to start embracing a digital future and becoming familiar with the intricacies of these emerging technologies, which will be  a prerequisite for broad adoption of T+0. It is essential for network teams to have a solid understanding of digitization and the implications for our investor clients.

Network managers need to start embracing a digital future

Data reigns supreme 

Data is a critical component for businesses that are operating in today’s ever-changing environment, and the custody market is no exception. If investors are to be successful, they require accurate and timely data.

Delivering the right data to end clients when they need it is not always straightforward in securities markets due to the number of different players involved in processing securities transactions. Whether it be sub-custodians, global custodians, central securities depositories or stock exchanges, the inherent interconnectivity and dependencies create a highly complex environment.

Interconnectivity of the different intermediaries creates a highly complex environment

More and more, global custodians are leveraging tools such as artificial intelligence and machine learning to systematize and organize multiple data sets from across the intermediary chain. This will help to facilitate enhanced client reporting and simplify some of the complex operational processes in areas such as client onboarding and KYC (know-your-client).

Network managers are also becoming increasingly responsible for providing an end-to-end view of data from the market to clients. For instance, the impact analysis that is taking place ahead of T+1 is all about making better use of data, with a view to improving the existing settlement process and building new technology to harness the data required to achieve T+1.

The future is digital

Digitization creates opportunities for network managers to strengthen our partnerships with agent banks, providing faster access to meaningful data that benefits our clients. At the same time, we need to retool our skills to develop an increased understanding of available data and, as mentioned, the emerging technologies that underpin this data. By doing so, we will be able to perform more effective data management and provide insights that help clients meet the challenges—and seize the opportunities—that are at the top of their agendas.

There will be an expectation for network managers to become data aggregators and technology integrators

We will no longer be able to simply pass on raw data to clients. There will be an expectation for us to become data aggregators and technology integrators, and to expand our role as industry knowledge providers—externally to clients and internally to other parts of the global custody organization. We will need to leverage technology to help execute change and solve operational issues as trusted partners to our clients.

Compressed trade settlement timeframes and digitization are rapidly changing the securities landscape. It is incumbent on network managers to embrace new technologies and work to harness the growing reams of data that are critical to our clients’ success. We are only as good as our network of agents and it is crucial to choose providers that enable us to deliver strategic value to our end clients.

You may also like


  1. R3, Atomic settlement: if you understand Amazon Prime, you already understand the process, February 1, 2022
  2. Securities Industry and Financial Markets Association, T+0? More risk, fewer benefits, February 2, 2022