Chanelle Crabtree
Consulting Principal – Investment Operations and Outsourcing
Chanelle Crabtree has extensive experience consulting for the asset management industry in Australia for the past 20 years. Chanelle has considerable knowledge and expertise in investment management, outsourcing, and the development of operational models that support the investment management lifecycle. Chanelle leads Cutter Associates’ Investment Operations and Outsourcing practice, and oversees Cutter’s Australia office. She has decades of experience working for investment management firms, custodians, and consulting firms, in roles that included middle-/back-office operational, business analyst, project management, consulting, and senior management. She has a deep understanding of investment management, covering the operational, governance, and system requirements to support all types of clients, products, and asset classes.
A former Director at Deloitte, Chanelle led key engagements, particularly for complex clients with diverse asset classes, covering target operating model design, sourcing, and implementation. Prior to Deloitte, Chanelle was a Lead Consultant at Morse Consulting Pty Limited, where she led various engagements that covered target operating model design, sourcing of custodians/systems, and implementations with investment managers and superannuation clients.
Your firm cannot rely on a delayed implementation date, and you need to consider how you'll be impacted.
We’ve heard a lot of noise ─ and seen the media coverage ─ around preparing for the move by the U.S. Securities and Exchange Commission (SEC) to T+1 settlement, with the U.S. and Canadian authorities opting to align ahead of the planned May 2024 implementation. However, market participants should not act slowly in preparing by relying on any shift in deadlines. Your firm cannot rely on a delayed implementation date, and you need to consider how you’ll be impacted.
Preparation is important, given that the U.S. share of the global equities market with investors worldwide is around 42 percent (as of January 2023), according to VisualCapitalist.com. Investment managers falling into time zones outside North America will need to ensure sufficient processing windows to remediate issues to enable T+0 trade instructions and consider the implications on currency funding and/or hedging programs. This is a global trend where Europe, the United Kingdom, and other markets are looking at the outcomes of the transition as they consider shortening their own settlement timeframes. Improvements within these core processes will place all parties in good positioning as other markets move to T+1 settlement.
Even with indirect market exposure, asset owners should ensure that their appointed investment managers prepare for the transition to avoid chasing or paying compensation claims due to settlement failures as part of their operational due diligence practices.
Tighter settlement timeframes impact the trade life cycle, including cutoff timeframes from custodians, and increase the need for efficient end-to-end processes.
How Do Your Processes Stack Up?
Is your firm prepared to handle the impact of the aforementioned break points? Are you operating at a reactive level, with good practices, or somewhere in between? The strength of your firm’s core processes and controls will determine your ease of transitioning to the new T+1 settlement timeframe. Unintended consequences for other related processes will likely arise, such as FX, securities lending, collateral management, stock borrowing, and corporate actions, where positions are not reconciled daily or are invisible to the front-office team as part of their decision-making processes.
To minimize operational risk resulting in adverse financial or reputational outcomes, we recommend that you review the following key areas in the context of instrument type, trading volumes, number of counterparties, time zone coverage, process automation, and funding approaches.
Automation is key to limit the number of break points in the trade cycle
Meaningful Steps Firms Can Take Now
The move to T+1 settlement offers an opportunity to address inefficiencies in your firm’s end-to-end model. Review workflows to automate and optimize trade processes within your operating model.
Operational risk (if not managed properly) equals financial and reputational risk.
Firms should carry out a targeted, centralized review for T+1 settlement readiness. Operations alone cannot ensure readiness. Technology and change management will prove critical. Consider training and communicating requirements across stakeholders to raise awareness and embed changed processes effectively.
Below are some areas that firms should consider:
Cutter can help guide you in achieving efficient and effective trade operations.
Contact us [email protected].