FITE7407
SECURITIES TRANSACTION BANKING
2024/25 –ASSIGNMENT:
REDUCING THE SETTLEMENT TIMEFRAMES
Assignment
Questions - Please answer all questions
In the ‘traditional’ area of Securities, we covered Shares, Bonds and Funds as the basic products of choice for investors. We looked at the basic processes for trading, settlement and custody and discussed settlement times.
Please consult the paper “T+1 After Action Report” on moodle, the documents referenced therein and do your own research on settlement processes and further acceleration of settlement times.
Please answer the following questions in this context:
1) (15%) Please explain the term ‚settlement‘ in the context of securities transactions. Please make sure you elaborate on the reasons for settlment, the meaning of ‘T+2‘ as well as the participants involved
2) (20%) Earlier this year, the USA moved to T+1. Please explain the rationale behind the move, i.e. describe the primary reasons and motivations for the shift from T+2 to T+1.
3) (20%) Identify and elaborate on the operational and technological challenges that financial institutions and transaction banks might face during such a transition.
4) (20%) Analyze how this transition impacts risk management and operational efficiency for banks and other market participants.
5) (15%) Compare the settlement cycle changes in the US with those in other major financial markets around the world. Discuss any similar trends or divergent practices.
6) (10%) Please speculate on the potential future developments in settlement cycles. Could T+0 be a realistic goal? What might be the benefits and drawbacks?
Assignment
Some good ideas
• Create a nice piece of text
• should look nice when printed - give it a title, page numbers, subheadings
• should be complete with Name and Student ID on the pages
• should have an academic tone to it (= no colloquial terms, use some “official” language)
• Consult students, books, internet, AI tools
• do some reading, to get more context
• do your ‘own reading’ – do not rely on given texts, esp not from ‘intelligent agents’
• Think about what you want to write
• give it a structure
• explain the structure
• make your statements / write your answers
• strip away everything that does not help to support your main idea
• Some words attributed to Blaise Pascal:
• “I would have written you a shorter letter, but I did not have the time”
• Don’t write all you know about a subject
• being selective in your answer shows that you know what is important
• writing all kind of facts unrelated to the question shows that you have difficulties in separating the important from the unimportant facts
• Beware of Wikipedia, Investopedia, AI Text generators…
• For our purposes, Wikipedia can be a valid source of initial/general knowledge
• For later uses (your thesis, academic texts), Wikipedia is an invalid source
• In some cases it can be instructive to consult AI search tools, in ALL cases it is dangerous to rely on them
• DO NOT COPY TEXT FROM ANYWHERE !!!!
• verbose “borrowings” must be labeled as such (nothing wrong with referring to or citing small portions of other writers’ text, that is part of academic writing)
• However, copying of text without giving the source of it is PLAGIARISM !!