STT guiding brokers toward full compliance with T+1 settlement in the US
“STT has taken proactive measures to implement the requirements for reporting, and we encourage all firms to communicate with their clearing firms to ensure compliance on their end. Working with our team at STT will assure seamless navigation and implementation.”
Sterling Trading Tech (STT) has introduced an initiative to guide broker-dealers, clearing firms, and other market participants toward full compliance with the SEC’s new rule transitioning to a T+1 settlement cycle for trades. This rule change, moving from the current T+2 cycle, will become effective on May 28, 2024.
The SEC clarified on February 15, 2023, that the final rule aims to benefit investors while minimizing credit, market, and liquidity risks for market participants. The rule impacts various groups, including institutional firms, clearing agencies offering central matching services, and Registered Investment Advisers (RIAs), all of whom must comply by the effective date.
The provider of order management, risk, margin, and trading technology aligns with the SEC’s objective of enhancing market efficiency and reducing risks, expressing readiness to support clients and market entities in their preparation efforts.
“STT has taken proactive measures to implement the requirements for reporting”
David Weiss, Chief Technology Officer at STT, said: “Our team has conducted a thorough analysis and assessed all potential impacts for T+1. We are ready and fully equipped to ally with our clients on implementation. STT has taken proactive measures to implement the requirements for reporting, and we encourage all firms to communicate with their clearing firms to ensure compliance on their end. Working with our team at STT will assure seamless navigation and implementation.”
The final rules not only shorten the standard settlement cycle, but the final rules will also improve the processing of institutional trades:
- A broker-dealer will be required to either enter into written agreements or establish, maintain, and enforce written policies and procedures reasonably designed to ensure the completion of allocations, confirmations, and affirmations as soon as technologically practicable and no later than the end of trade date.
- Registered investment advisers will be required to make and keep records of the allocations, confirmations, and affirmations for certain securities transactions.
- Central matching service providers will be required to establish, implement, maintain, and enforce new policies and procedures reasonably designed to facilitate straight-through processing. They must also submit an annual report to the Commission that describes and quantifies progress with respect to straight-through processing.
The final rules will become effective 60 days after publication in the Federal Register. The compliance date for the final rules is May 28, 2024.
STT launched a risk solution for 0DTE (Zero Day to Expiration) options
STT recently launched an enhanced solution for managing risk and margin for Zero Day Options Expiration. This advanced offering includes a proprietary order management system, a risk and margin system, and trading platforms for the capital markets worldwide.
With an increase in the number of 0DTE (Zero Day to Expiration) option contracts offered by exchanges and record option volumes, managing expiration risk has become a critical task for firms. STT’s comprehensive product suite enables risk managers to adopt a proactive approach to both pre and post-trade risk management.
The pre-trade solution includes STT’s sophisticated Order Management System (OMS) rules engine, which allows firms to restrict trading on expiring option contracts at a configured time. The post-trade offering features STT’s Risk & Margin solution, encompassing Horizon Risk, which identifies accounts at risk of a deficit post-expiration, and pin risk analysis for all expiring options, both in and out of the money. Additionally, STT’s option closeout API assists in identifying options that should be closed to avoid a deficit post-expiration, thereby streamlining decision-making during critical end-of-day tasks.
Furthermore, STT’s custom house policy builder empowers firms to inform margin requirements in real-time based on their specific risk measures, facilitating best-in-class decision-making. Integrating risk and margin in a single system provides risk managers with the flexibility to make position liquidation decisions in real time, considering both margin and risk factors. The Option Closeout API offers an automated solution to prevent accounts from facing a margin call post-expiration.
