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Analyst Doesn’t See T+1 Till 2010

Despite the fact that T+1 seems a distant memory, many consultants and analysts keep singing the STP tune.

Even though T+1 will probably not be a reality until 2010, firms should keep their focus on achieving straight-through processing, says Mason Snyder, senior manager with Braxton, formerly Deloitte & Touche Consulting.

"We wanted to identify to our clients the areas that, in a post-T+1 world, they should continue to place their focus on -- given the current pressures on cost reduction and for creating a business case -- that will provide results both in the short term and for a longer term STP vision," says Snyder, the primary author of Braxton's "STP in a Changed Environment" white paper.

In the paper, Braxton ranks four areas that offer "short-term value creation" in order of importance: data management, functional consolidation, DTCC connectivity and middleware architecture.

Though Snyder says that efficient data management was, and is, considered to be the most critical element of a securities-processing environment, functional consolidation has risen in importance now that T+1 is no longer.

"Functional consolidation, for example, could mean if you have multiple products within fixed income, rather than having separate technology and operations units supporting each one of those products, you consolidate the functions that are common to all of them, where possible," he says.

As for DTCC connectivity, Snyder says that the absence of a T+1 mandate is bringing the depository's new tools to the forefront. One of the main creations of DTCC is a new Inventory Management System that aims to help operations personnel gain greater control over the securities that move through their shops. (For a full discussion of DTCC's IMS, go to: www.wallstreetandtech.com/story/WST20020306S0002 )

Other DTCC projects of interest, he says, are the corporate-actions hub, continuous-net settlement, and securities-lending-recall system.

Due to the state of the industry, Snyder doesn't see firms being ready for T+1 anytime soon. "I can't say (T+1) is gone forever, but I don't think they will decide in 2004. I don't see a deadline being established at that time. I think the industry is still very mixed in its opinion as to whether or not it makes sense to move to T+1," he says.

Braxton lists its "Emerging Focus Areas" for the buy side as order-management system and portfolio-accounting system consolidation and corporate actions; for the sell side as order-management-system consolidation and corporate actions; and for custodians as buy-side back-office outsourcing and corporate actions.

Snyder says that in today's environment consultants and vendors alike have to provide proof of a quick return on investment for any project to get approved. For example, he says, firms that have embarked on middleware solutions will most likely continue them to completion. However, those that have not started down such a path will probably look for a more ROI friendly way to spend their money.

Once T+1 went away, central matching became an area where firms didn't see a strong ROI business case so no one was spending their money on ventures like GSTPA -- a virtual-matching utility that went bankrupt last year, he says. "Without T+1, the external VMUs (Omgeo, etc) will have a difficult time succeeding. Larger firms are starting to think about creating their own internal-matching utilities which will perform many of the same functions at a reduced cost," says Snyder.

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