AS WALL Street braces for the new era of faster settlement times across securities, Citigroup’s global custody business is leaving nothing to chance after taking measures to avoid failed trades ahead of the end-May deadline.
The firm has shifted the work hours of some of its staff in Kuala Lumpur to align with those in the US, Michele Pitts, head of North America custody product strategic initiatives at Citi Securities Services, said. It has also created a task force that will solely focus on the move to a one-day settlement cycle, a process also known as T+1.
“The intent here is to be hyper-focused,” Pitts said. “As an industry, we are going to be only as good as the weakest link.”
Citi joins dozens of other financial institutions preparing for the shift. The move – which has, so far, prompted some shops to buy US dollars, extend night shift hours and redeploy staff – is expected to cost global investors more than US$30 billion annually as it comes into effect on May 28, according to Bloomberg Intelligence. While the rationale behind T+1 is to lower the risk of defaults on transactions before they are completed, it comes with big operational challenges for the overall industry.
Citi is adjusting by moving a part of its staff in Kuala Lumpur to a Tuesday to Saturday schedule – instead of a typical Monday to Friday one – to better align with counterparts in the US, said Pitts.
Because it has service centres in several cities, including Warsaw, Dublin, Tampa in Florida, and Pune in India, coordination is a crucial part of the T+1 move, Pitts added. Moving the hours allowed it to have live support in multiple regions, she said.
GET BT IN YOUR INBOX DAILY
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
The temporary unit that the firm created within its operational team in various service centres formed around four weeks before May 28 and will disband six weeks after, Pitts said. It will specifically focus on helping the firm speed up the settlement cycle to meet the new rules.
Also as part of its efforts to prepare for the T+1 process, Citi earlier this year enhanced its online global exchange-traded fund (ETF) portal, Aces, that fully automates the entire creation and redemption process to simplify order management and onboarding ahead of the settlement shift. The enhancement comes after the firm moved to a technology stack that eliminated batch processing, allowing it to support T+1 across asset classes.
The firm’s ETF Services business covers 12 markets globally, with over US$555 billion in assets under administration as at December 2023. The bank supports over 50 global ETF issuers and close to 600 funds. BLOOMBERG
