A Compliance Checklist for Firms Transitioning to T+1 Settlement

The move toward T+1 settlement—where trades are settled one business day after execution—marks a significant change for financial markets. While the transition promises faster trade cycles, reduced counterparty risk, and improved liquidity, it also introduces new compliance and operational challenges.

Firms must adapt their systems, processes, and risk management frameworks to remain compliant and competitive.

Here is a compliance checklist to help firms prepare for a smooth transition to T+1 settlement.

Review Current Operational Workflows

Before making changes, firms should map their end-to-end trade lifecycle under the existing T+2 environment.

1. Identify bottlenecks in trade confirmation and settlement processes.
2. Review trade matching, allocation, and affirmation procedures.
3. Highlight manual tasks that may cause settlement delays.

This baseline assessment ensures firms know exactly where to focus improvements.

Upgrade Trade Matching and Affirmation Processes

One of the most critical requirements of T+1 settlement is accelerated post-trade processing.

1. Ensure near real-time trade affirmation between counterparties.
2. Implement automated matching systems to reduce reliance on manual reconciliation.
3. Adopt industry platforms such as DTCC’s ITP services to streamline trade affirmation.

Firms that fail to confirm trades quickly risk higher settlement failures and regulatory scrutiny.

Strengthen Technology and Infrastructure

Technology upgrades are at the heart of a successful transition.

1. Upgrade order management and trade execution systems for faster straight-through processing (STP).
2. Integrate clearing and settlement platforms with real-time monitoring tools.
3. Enhance data accuracy and consistency across front, middle, and back-office systems.
4. Robust infrastructure not only supports compliance but also helps firms gain efficiency.

Reassess Risk and Liquidity Management

A shorter settlement cycle compresses timelines for funding and collateral requirements.

1. Update treasury practices to ensure cash and securities are available within the tighter window.
2. Reevaluate credit and liquidity risk frameworks.
3. Coordinate with custodians and clearing brokers to align funding schedules.

Failure to adjust liquidity management could lead to settlement delays or increased financial exposure.

Strengthen Vendor and Counterparty Coordination

T+1 settlement compliance is not just about internal readiness—it also requires strong external collaboration.

1. Engage with custodians, clearing houses, and brokers to align settlement processes.
2. Review service-level agreements (SLAs) with third-party providers.
3. Ensure vendors can deliver timely confirmations, reporting, and settlement updates.

Effective communication across the trading ecosystem reduces the risk of settlement mismatches.

Enhance Compliance Monitoring and Reporting

Regulators will closely watch how firms adapt to the new framework.

1. Update internal compliance policies to reflect T+1 requirements.
2. Implement automated alerts for settlement failures and regulatory breaches.
3. Ensure accurate and timely reporting to regulators and industry bodies.

Stronger compliance oversight not only reduces risk but also demonstrates operational resilience.

Conclusion

The transition to T+1 settlement represents a new era of efficiency in global markets. However, it requires firms to adapt quickly to compressed timelines, enhance technology, and strengthen compliance frameworks.

By following a structured compliance checklist—covering workflows, technology, liquidity, vendor coordination, and regulatory reporting—firms can reduce risks and position themselves for success.

In an environment where speed and accuracy are critical, firms that prepare early will not only stay compliant but also gain a competitive advantage.