Study Shows Asian Firms Are Not Ready for Move to T+2 For European Securities

While most of the European markets are about to move from a three-day settlement period (trade date plus three days, or T+3) to a two-day settlement cycle (T+2), Asian firms with dealings in Europe are not prepared to cope with the change, according to a report commissioned by Omgeo and published by Celent.

While 73 percent of firms said they will change their technology processes to meet the T+2 requirements for European securities, 58 percent have yet to implement any changes, the report says.

"In Asia-Pacific, a shorter European settlement cycle will be particularly challenging due to operational complexities associated with time zone differences," says Matthew Chan, head of Asia strategy at Omgeo. "For firms with significant European trading activity, automating processes is critical to meeting the T+2 deadline. It is also important that firms match trades on local T+1, as the current T+3 buffer for managing mismatched trades will cease to exist within the new compressed cycle."

However, out of all the firms surveyed, only 18 percent of respondents plan to change their investment strategies in order to avoid the T+2 regime.