T+1 settlement: CLS sticks to its guns but argues impact is limited
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T+1 settlement: CLS sticks to its guns but argues impact is limited

The body responsible for settling about $6.5 trillion of global daily FX trades has decided against extending its deadlines to accommodate non-US participants who still want to use its next-day settlement service. But it expects the impact to be limited – far too limited to justify the complexity that a change would impose on its members.

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Photo: iStock/Brian A Jackson

It is now just one month until the long-awaited move to T+1 for US securities transactions. For one group of market participants – non-US asset managers and funds – it is still uncertain how matters will play out after May 28, particularly since FX settlement organization CLS earlier this month scotched a possible easing of its deadlines.

At the moment, participants can transact in US securities very late in the day in Europe, safe in the knowledge that they have all the following day to carry out their FX trade and still meet the CLS settlement deadline of 11pm London time that day, so that both the FX and the securities trade can settle on the day after that.

The move to T+1 securities settlement scuppers that arrangement because the FX will need to be settled by the time the securities trade settles, one day earlier than now.

For those in this predicament, there are going to be a few options, none of which seem hugely appealing.

The first is to attempt to execute the FX in the window between their security transaction and whatever deadline their custodian imposes on them on that same day if they are to meet the CLS initial pay-in schedule (IPIS) calculation deadline of 11pm London time in order for the FX trade to be settled overnight through CLS.


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