Citi’s Post

If you had fully assessed the counterparties creditworthiness you will not encounter much problem in settlement cycle whether it's T + 1 or T + 0 particularly if the counterparties are the highest rating in the regulatory credit classification.It reduces settlement risk.

ISITC EUROPE CIC T+1 research paper published last year raised the prospects of lenders withdrawal from lending. This especially in less liquid securities or Mid Cap. Stock loan recalls efficiency is fundamental to lenders lending and T+1 has significant operational and technology challenges as much as communication at the recall initiation phase. This problem is unresolved in the USA and is currently in a similar state in the UK and EU

T+1 means that trade settlements will soon have one less day to perform critical activities. This settlement compression will impact the entire trade and post-trade lifecycle, including account opening, securities lending, FX funding, and more. Learn how Citi Securities Services is helping our clients ensure a smooth transition: http://citi.us/3Oy8aOv

Inside the latest issue - https://lnkd.in/eZp4xntX Industry Excellence Awards shortlists announced Covering lending, repo, data, regulation, collateral, operations, and trading systems among others. We are excited to announce the shortlists for the upcoming Securities Finance Industry Excellence Awards

𝙏𝙧𝙖𝙣𝙨𝙞𝙩𝙞𝙤𝙣 𝙩𝙤 𝙏+1 𝙎𝙚𝙩𝙩𝙡𝙚𝙢𝙚𝙣𝙩 𝙞𝙣 𝙐𝙎 𝙈𝙖𝙧𝙠𝙚𝙩𝙨: 𝘼 𝙎𝙞𝙜𝙣𝙞𝙛𝙞𝙘𝙖𝙣𝙩 𝙎𝙝𝙞𝙛𝙩 𝙞𝙣 𝙍𝙞𝙨𝙠 𝙈𝙖𝙣𝙖𝙜𝙚𝙢𝙚𝙣𝙩 The transition to a one-day settlement (T+1) in the US capital markets is progressing smoothly, resulting in a notable reduction in the cash buffer for counterparty defaults. According to The Depository Trust & Clearing Corporation (DTCC), the National Securities Clearing Corporation Limited’s Clearing Fund has decreased by approximately 25%, releasing $3.1 billion compared to the two-day settlement period. This reduction in credit risk reflects the efficiency gained by shortening deal completion times. Brian Steele, President of Clearing & Securities Services at DTCC, highlighted the smooth implementation and early benefits of the shift. However, the costs associated with this change, estimated at $8 billion annually by Bloomberg Intelligence, underline that risks remain, albeit at a reduced level. This strategic move, which gained momentum after the 2021 meme stock frenzy, continues to be monitored for its impact on market stability and operational costs. This pivotal change not only enhances transaction efficiency but also necessitates continued vigilance in managing the associated costs and residual risks. Professionals across the finance industry should consider the implications of these adjustments on their strategies and risk management practices. https://lnkd.in/dAjxaTij

The move to T+1 settlement means that any corporate actions affecting instrument static data (and thus impacting trade matching), needs now to be processed within 24 hours of trade execution, to avoid failed settlements. Organisations dependent on custodian data and spreadsheets to handle events may struggle. Time zone differences and any event-related FX considerations will compound difficulties further. With settlement discipline an increasingly important regulatory focus, pressure to avoid errors is rising. The need for greater speed will also affect voluntary events – especially in areas such as prime brokerage and securities lending. 👉 TLM Corporate Actions uses event-driven #automation and active alerting to provide effective governance of all corporate action events and proxy meetings. Our on-demand solution offers a particularly useful way ahead, given the decreasing time firms have at their disposal. https://lnkd.in/gn-SSENP #fastersettlement #tradingcycles #corporateactionsprocessing #assetservicing

Who are the measure participants of financial system? Explain the role of custodian and depository in investment banking? In the financial system, key participants includes: 1. Buyer 2. Seller 3. Broker 4. Dealer 5. Custodian 6. Depository 7. Regulatory 8. Clearing house 9. Investment Bank 10. Retail bank 11. Register and transfer agent 12. Stock Exchange ( BSE, NSE) 13. Funds house 14. Government * Custodian - Safekeeper: Custodian hold securities and other assets and securely . - Record- keeping : Custodian maintain detailed records of ownership and transaction. - Example : JP Morgan, PNP Paribas * Depository - Centralized settlement: The electronic trnasfer of securities, reducing the need for physical Certificate. - Dematerilization: They convert physical securities into electronic form , simplifying trading and ownership transfer. - Example: NSDL, CDSL

Can tokenization pave the way for future growth in private credit markets? Moody’s Ratings has asked RWA.xyz to explain the opportunities and risks of tokenized private credit assets. Read this Q&A installment from Bits, Bytes, and Basis Points here: https://mdy.link/4bDJihH #Finance #Tokenization #PrivateCredit #DigitalEconomy #Innovation

For our latest piece, Mac Naggar and I had the privilege of being interviewed by Cristiano Ventricelli of Moody's Ratings. Originally published back in May 2024, this interview contains a mix of tokenization market data and an overview of practical elements of blockchains in financial services. As always, a special thanks to Adam Lawrence and Charlie You for letting us represent the RWA.xyz brand (in style 😎). Reach out directly for additional information. #tokenization #privatecredit #blockchain #realworldassets #rwa #crypto #finance

Moody's, a leading traditional finance ratings agency, interviewed us about the impact of tokenization on private credit and other real-world assets! Here are the key takeaways: 📓 1. Traditional private credit is the top risk-adjusted asset class of the last decade, but is generally only available to professional investors. Tokenization can change this, allowing access to this lucrative asset class to accredited and even retail investors. 2. Tokenization can greatly increase the transparency and efficiency of value transfer throughout the lifecycle of a credit fund, including LP subscription and redemption, loan disbursement, interest payments, and collateral liquidation. This is due to the automation that is possible with smart contracts, along with near-instant settlement of tokens. These could also enable liquid trading of LP shares and individual loans, but this is yet to be seen. 3. Adoption of tokenized private credit is higher in emerging markets with less developed financial systems, where there is a greater need for access to credit. Latin America, Africa, and South-east Asia, are the most common recipients of on-chain, RWA lending. 4. All lending contains risk, and tokenized credit is no different. 4% of on-chain loans experienced a missed payment, compared to 1.5% in traditional markets. Yields were not higher to make up for these defaults: 9.6% in tokenized private credit, and 11.8% measured by the Cliffwater Direct Lending Index. This suggests some degree of adverse selection taking place amongst borrowers. One key to further growth is closing this gap by having higher-quality issuers and originators tokenize their assets 5. Tokenized private credit has largely evaded regulatory scrutiny, with issuers tending to operate under Reg D and S exemptions under the US Securities Act. This mirrors its traditional financial counterpart, which tends to have less oversight than public credit, a much larger market. These were just a few of the insights in a wide-ranging interview, so be sure to check out the full report below!