Canada Investment Managers Confident on T+1 Matching

Uncertainty about monitoring and reporting rules, greater confidence behind meeting new matching requirements, and increased automation are at the top of the priority list for Canadian operations chiefs at investment management firms, according to a study by Stratix Consulting and post-trade processing provider Omgeo.

Of the 15 interviews conducted, all with firms with at least CA$10 billion ($9.7 billion) under management, 60 percent of respondents said monitoring and reporting will drive change in their middle- and back-office processes going forward.

Particular concerns are international initiatives regulating electronic trading for over-the-counter (OTC) derivatives, and the forthcoming legal entity identifier (LEI) requirement for derivative instruments, which two-thirds of those surveyed said would require significant improvement in their back offices, even while few respondents reported making those improvements yet because of regulatory uncertainty

Meanwhile, post-trade derivatives matching is becoming both more electronic and more automated in Canada: The number of derivatives locally and centrally matched has doubled, from 10 to 20 percent, since 2010.

On a brighter note, all 15 respondents reported the full ability to comply with the Canadian Securities Administrator's (CSA) new trade date plus one day (T+1) matching requirement, which stipulates that firms match 90 percent of their trades by noon of the following day. Respondents attributed much of that achievement to advancements in straight-through processing (STP).

"Canadian investment managers are confident that if trade settlement in North America moved to T+2 from T+3, in response to Europe adopting a trade settlement standard of two days, that their systems and processes could accommodate T+2 settlement. They did, however, express concerns about delays in receiving trade information from the sell side, and said that they were not receiving adequate information on the cause of these delays that would allow corrective action to be taken," says Bob Smythe, consultant for Stratix Consulting.