‘Very careful thought’: T+1 will introduce costs, complexities for ETF traders

When the US moves to T+1 at the end of May 2024, firms trading ETFs will need to automate their workflows as much as possible to avoid "settlement misalignment" and additional costs.

The upcoming shortening of settlement cycles from T+2 to T+1 in the US has already highlighted a host of “unintended consequences,” particularly for firms in Europe and Asia. Some of those issues relate to managing FX risk or hedging. But in the world of exchange-traded funds, where global trading volumes reached nearly $45 trillion in 2023, the US moving to a T+1 settlement cycle could have far-reaching impacts on firms’ exposure to the underlying securities in an ETF.

ETFs comprise a basket of

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