Insight
October 2024
CJ EMSON
FMSB issue Standard for Sharing of Standard Settlement Instructions for Consultation
Recap
The FMSB have been working with industry participants in preparation for the UK’s move to T+1 in 2027. The UK Accelerated Settlement Taskforce published their recommendations for the smoothest transition to a T+1 Settlement regime in the UK in September. The European Industry Taskforce recently published their recommendations also, with both bodies broadly aligned in their principles.
Earlier this year, the Financial Markets Standards Board (FMSB) initially published their Draft of Standard Sharing of Standard Settlement Instructions, which sets out 9 Core Principles relevant to the sharing of Standard Settlement Instructions (SSIs). These operational recommendations are planned to be put in place by the end of 2025 to aid the move to T+1 in 2027.
The proposed Standard aims to increase the adoption of digitization, where relevant, in sharing and managing SSIs for more efficient STP processes which will benefit the entire industry. Provisions for manual solutions, where digital solutions are not available, or appropriate, have also been included. The FMSB have set a deadline of October 18th for responses to the draft.
Market Reaction
SSIs are a critical part of post-trade, given the complexities of the financial entities which are trading securities and the transfer of funds and securities which SSIs facilitate. The recommendations from the FMSB highlight the need for automated solutions for SSIs, with our focus drawn to 5 of the 9 Core Principles:
Core Principle 1 – Use of Industry Platforms
Core Principle 2 – Off Platform
Core Principle 3 – Timing
Core Principle 4 – Data Fields
Core Principle 5 – Data Format
Core Principle 6 – Data Validation
Core Principle 7 – Validity
Core Principle 8 – Governance and Responsibility
Core Principle 9 – Periodic review
Core principles 1 and 3-5 comprise recommendations for greater utilization of industry vendor tech, the supply and validation of SSIs at onboarding, comprehensive SSI data supply including Legal Entity Identifier (LEI), standardisation of SSI formats and pre-matching of SSIs. These 5 points summarise the current issues with SSI supply, management and allocation – lack of standardisation, low depth of data in SSI records, SSI information being shared too late to be useful and slow uptake of vendor solutions which will resolve these issues.
Worthy of an additional mention, Core Principle 7 also contains a reference to ‘SSIs which have not been used for settlement in the past 12 months or used for a trade whose settlement has failed should be reviewed and amended or deleted as appropriate’, a measure we would also welcome.
EquiLend and SSImple’s partnership is an example of the opportunities for improvement to the trade lifecycle which still exist. Our Enhanced SSI Repository and SSI management solution, supports enhanced SSI enrichment, storage and sharing, accepting SSI inputs directly from the custodian or buy-side client. Simplifying SSI management and sharing reduces latency in the trade lifecycle and paves the way for greater efficiencies in the sector.
William Daws, Global Lead, EquiLend Post Trade Client Engagement: “For many years SSIs have been discussed on industry forums as a problem that has not yet been fully solved for. We welcome the FMSB recommendations to drive system to system exchange of SSI information and to standardise the exchange of SSI data across the industry. The core principles already have great synergy with EquiLend’s, , SSI Repository, powered by SSImple.”
Bill Meenaghan, Founder and CEO, SSImple: “As the industry moves toward T+1 settlement, the FMSB’s focus on electronic SSI sharing in Core Principle 1 is crucial. SSImple supports this shift with an automated SSI repository that ensures accurate, timely, and standardized system-to-system exchange of SSIs.
Beyond simplifying electronic sharing, SSImple also eliminates the need for manual cash callbacks, streamlining processes and reducing inefficiencies. By reducing reliance on manual tasks, SSImple helps firms lower operational risks and costs in the medium to long term, aligning with the FMSB’s recommendations and preparing institutions for a more efficient and cost-effective T+1 settlement regime.’
