A transition to T+1 would represent a 鈥渟ignificant evolution鈥� for Asia Pacific markets, but from a securities finance perspective, the stakes are particularly high.
These comments were made in a recent report by the 网爆吃瓜 Finance Association and WTS Hansuke, entitled .
APAC markets are at different stages in evaluating whether, when, and how to move from T+2 to T+1 settlement.
Most listed cash equity markets in the Asia Pacific region now operate on T+2 settlement cycles 鈥� though with notable exceptions such as India鈥檚 equity T+1/voluntary T+0 and China鈥檚 T+0/T+1 model.
The paper is intended as a strategic, securities financing-focused framework to support national discussions, and deliberately concentrates on securities financing transactions (SFTs), securities lending, repo, and associated collateral management.
It underpins a series of fundamental objectives that are essential to consider for any T+1 transition from a securities finance perspective, such as to maintain or improve current settlement efficiency; and to ensure that existing investors and market participants can invest with low levels of friction.
Other objectives are: to keep market participants engaged in securities lending while continuing to attract new sources of supply to the lending market; and to maintain or improve cash market and funding liquidity and ensure continuity under periods of market stress.
According to the report, interaction between compressed settlement timelines and mandatory buy鈥恑n regimes represents one of the most acute risks for Asia Pacific markets considering a move to T+1.
Regulatory approaches differ across the region, and the complexity arising from divergent timelines will be felt most acutely by global custodians, international broker-dealers, prime brokers, and cross-border investors 鈥� who will need to manage multiple settlement cycles in parallel.
Without addressing this complexity across the industry, liquidity risks will materialise across multiple fronts, the report says.
For instance, cross-border flows could become increasingly operationally intensive for asset managers and they could step back from securities lending to avoid penalty risk from potential buy-ins.
For clearers and prime brokers, they could face restricted 鈥楪ive-Up鈥� trading flows, reduced access to equity borrow inventory from the Street, and could carry more inventory on balance sheet.
For buy鈥恑n regimes, the report suggests that a range of options can be considered, from removing the requirement, to broadening relevant exemptions, moving to a fee鈥恇ased penalty model, introducing grace periods during and post-implementation, increasing exemptions, deferring buy鈥恑ns to end鈥恛f鈥恉ay on settlement day plus one, or positioning the exchange as a lender of last resort.
Critical infrastructure enhancements, introducing continuous settlement cycles (or additional settlement batch runs), strengthened real-time gross settlement frameworks, and scalable partial settlement are essential to support the compressed timeline and maintain market resilience, according to the report.
The paper concludes: 鈥淯ltimately, T+1 is not an end in itself but a means to reduce settlement risk, improve capital efficiency, and align with global market standards.
鈥淔or Asia Pacific markets, the opportunity is to realise these benefits while preserving, and strengthening, the contribution that securities lending and repo make to well鈥恌unctioning, resilient capital markets.鈥�
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