As the UK and Europe advance towards their 2027 deadline for T+1 settlement, The Depository Trust & Clearing Corporation (DTCC) has announced that BNP Paribas and J.P. Morgan have adopted its CTM automated tri-party matching workflow. The move is a significant indicator that large-scale preparations for the compressed settlement cycle are gathering pace, with firms seeking to automate and streamline critical post-trade processes.
The adoption addresses a key challenge in the prime brokerage operating model, where trade communication between hedge funds, executing brokers, and prime brokers has often been fragmented, leading to delays and potential settlement failures. By centralising this process, the CTM workflow creates a single “golden copy” of trade details, a foundational requirement for achieving settlement on a T+1 basis.Val Wotton, Managing Director and Global Head of Equities Solutions at DTCC, explains the mechanics of the solution to TradingTech Insight. “At its core, CTM supports the institutional trade flow across cash securities asset classes. In the US, this includes a comprehensive allocation, confirmation and affirmation process that takes place before instructions are sent to the Central Securities Depository (CSD). This flow is unique to the US market and doesn’t exist in Europe. We have now created an enhanced workflow within CTM for international securities markets, which introduces a 3-way match between Hedge Funds, Execution Brokers and Prime Brokers. The workflow allows the Prime Broker to be notified of the Hedge Fund trade instantly after it matches in CTM. This allows expedited risk and position management, and also increases settlement efficiencies for all parties to the transaction. As the Prime Broker has the ability to agree and match the transaction, it provides the foundation to unlock clearing opportunities for institutional transactions that don’t exist in Europe today.”
Navigating European Complexity
This automated matching is just the first step in a broader vision for a more integrated post-trade ecosystem. The ultimate goal is to achieve seamless straight-through-processing (STP) from execution all the way to clearing and settlement.
Wotton notes that DTCC is already working on the next stage of integration. He says, “Our next step is building connectivity to Central Counterparties (CCPs). We announced a collaboration with Cboe Clear Europe last year and are in discussions with other CCPs. The goal is to take the ‘golden copy’ of a trade agreed by all three parties and send it directly for clearing, allowing firms to benefit from netting and balance sheet efficiencies. This will directly support T+1 by ensuring trades are matched and agreed on the same day.”
While the concept is straightforward, the European market structure presents unique complexities. Unlike the relatively centralised model in the US, Europe is a mosaic of national CSDs and CCPs, each with its own standards and protocols. Automating across this landscape is a significant challenge, but one that technology is well-placed to solve.
Wotton acknowledges this complexity as a key driver for automation. He says, “We can take processes that might currently be handled through spreadsheets or other off-system methods and bring them into a fully automated, straight-through-processing (STP) environment. We are very conscious of Europe’s complexity due to the number of CCPs and CSDs, but most CCPs have a standard FIX message for receiving trades, which simplifies connectivity.”
A Call for Readiness and a Look to the Future
Despite the availability of solutions, there is a growing concern that parts of the industry are not moving fast enough. The US transition to T+1 revealed that firms without high levels of automation were forced to increase headcount and manual interventions to cope with the compressed timeframe, a costly and unsustainable approach.
Says Wotton: “My concern is for firms that are still in a “wait and see” mode, perhaps pending the final publication of Giovanni Sabatini’s report. The risk is that they may end up allocating additional staff and resources to address emerging needs, as some did in the US, rather than using this as an opportunity to automate. Instead, we should seize the moment and use this requirement as a unique opportunity to drive further automation and efficiencies. Credit to the UK and European Task Forces as they have laid out a clear blueprint for what needs to be assessed. The critical lesson is for firms to apply that blueprint to their own operations.”
Looking beyond the immediate T+1 deadline, DTCC is already exploring how next-generation technologies like artificial intelligence can further enhance post-trade efficiency and resilience. The focus is shifting from simply reacting to issues to proactively predicting and preventing them before they impact the market.
Wotton explains how AI is being integrated into DTCC’s platforms. “We are focused on leveraging AI for predictive analytics in two main areas,” he says. “First, we’ve built extensive observability tooling for our platform’s resiliency, and we’re embedding AI to monitor our internal applications and client submission patterns. If we spot an anomaly, we can proactively address the issue. It’s about moving to become more proactive. Second, we’re building out more analytical insights into client behaviour and the root causes of trade fails. By using predictive analytics, we can identify scenarios that might lead to a fail and get in front of the problem, putting actionable information into our clients’ hands.”
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