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Market Participants Believe Shorter Settlement Cycles are on the Horizon, Citi Survey Shows

C | November 2, 2022

A Citi survey shows market participants around the world increasingly believe that shorter settlement cycles will become reality.

The second edition of Citi’s “Securities Services Evolution” whitepaper shows 51% of market participants expect the prevailing settlement timeframe for equities to be T+1 by 2026 – up seven points from last year’s survey. This sentiment is supported by several key markets moving towards a T+1 settlement cycle recently, including the United States, Canada and India.

Okan Pekin, Global Head of Securities Services at Citi, said: “We are seeing a greater sense of momentum and purpose in all developments across the industry, in particular the determination to move to a T+1 settlement cycle. Delivering these changes will be no small feat but in due course offer the prospect of very substantial cost savings and efficiencies.”

Citi’s whitepaper includes quantitative and qualitative data gathered from 12 financial market infrastructures (FMIs) and almost 300 market participants from banks, broker-dealers, asset managers, custodians and institutional investors around the world. Collectively, these insights continue to provide a rare, holistic view of ongoing developments across the global securities market ecosystem.

Some new findings from this year’s whitepaper include:

88% of market participants stated that their organizations are either actively participating in, or exploring use cases for digital assets, blockchain or distributed ledger technology (DLT).
54% said a DLT-based market infrastructure could cut post-trade processing costs by 10-30%.
79% believe that atomic settlement is achievable in less than 10 years.
92% see the value and benefits of tokenization to market liquidity, and variety of tradeable assets.

FMIs and market participants continue to have opposed views on a number of topics. For example, FMIs see risk reduction as a major benefit of reducing settlement cycles, which will in turn enable lower margin requirements and the release of capital. In contrast, only 17% of market participants survey felt the same way.

On the other hand, FMIs and market participants have become more closely aligned on their views regarding DLT’s role in facilitating a successful transition to T+1/T+0. FMIs believe that while DLT has a role to play, it is not an essential requirement. Only 21% of market participants (down vs 40% last year) think DLT will be core to a shortened settlement cycle.

With over $25 trillion* of assets under custody and administration and with an industry-leading proprietary network spanning over 60 markets, Citi Securities Services provides clients with extensive on-the ground local market expertise, innovative post-trade technologies, customized data solutions, and a wide range of custody and fund services that can be tailored to meet clients’ needs.

*As of 6/30/2002, represents totals assets under custody, administration and trust.

Citi
Citi is a preeminent banking partner for institutions with cross-border needs, a global leader in wealth management and a valued personal bank in its home market of the United States. Citi does business in more than 160 countries and jurisdictions, providing corporations, governments, investors, institutions and individuals with a broad range of financial products and services.