Heard at Ops: Deloitte’s Bob Walley on planning for T+1

As part of the Heard at Ops series with top operations and technology leaders, Bob Walley, Principal, Financial Services at Deloitte talks T+1: stay connected and know the impacts as you plan for the coming changes.

Q. T+1 is a huge undertaking and with the SEC’s proposal issued and the Industry Implementation Playbook to become available this summer, what should firms be doing right now?

A. T+1 is a broad and deep program that firms need to think about. And thinking about it in the 27-month timeline:

  • 2022 is all about the analysis and understanding what are the impacts of T+1. The work that was done to produce the heat map is a very good indication of those impacts and a great guide for firms. Firms should assess these impacts and develop their game plan to prepare for T+1.
  • 2023 will be the year of the build. Coming out of 2022, firms should know their resource requirement and know what the book of work looks like. Hopefully, they have gone through budgeting cycles and acquired those budgets to ensure resources are available. So, as we think about the people, the process and the behavioral changes that will need to take place, 2023 is when all of that will manifest itself and play out.
  • 2024 will be the transition period. That is looking at industry-wide testing, testing with your vendors and all the integration. Then, ultimately, it’s the education with your clients: whether it is on the retail side or the institutional side and consider the global perspectives as well.

We talk a lot about the happy path, about how the transition to T+1 will work; it is also important for attention to be on operational resiliency.

Q. With collaboration key to operational resiliency, what will it take for the industry to work together to successfully transition?

A. DTCC released its white paper in February 2021 and over the summer of 2021, SIFMA, ICI and DTCC engaged with Deloitte to build that heat map of the impacts I spoke about. That started to let us coalesce around these issues to move forward.

Deloitte, SIFMA, ICI, DTCC and the industry spent four days a week for 12 weeks working through the issues that led to the industry report being produced and which the SEC referenced in its proposal 67 times. What’s important is: people paying attention and getting involved in these industry forums. SIFMA, ICI and DTCC will be running a cadence of calls and meetings to continue this coordination.

The industry needs to stay in sync – to stay connected, stay involved, ask the questions but also start to do your own homework about what the implications to your firm are and the specific problems you need to solve for your clients.

Q. What is a key T+1 issue that firms must keep in mind?

A. We’re finding that these impacts are rolling up into the client onboarding stage, into client contracts as well as the communications networks. How do we share information, the availability of the information and the quality of data? The T+1 Panel at SIFMA Ops got into that a little bit more, and the playbook will expand on very specific aspects and be an instruction manual of how to transition to T+1.

But every firm’s going to be different. Every firm’s going to have its own unique set of challenges and issues. And that is what’s important for everybody to realize: we all are in the same industry, but we all have our own culture. We all have different business models, different ways of doing things and very, very diverse infrastructure. It’s going to become real when firms actually do that impact analysis.

Q. What is the industry’s biggest challenge?

A. There are a number of challenges adding to the pressure on the operations team.

The volatility of the markets is one. It is both a distraction and a tremendous pressure. As an interesting data point, the Consolidated Audit Trail (CAT), which the industry has been working on for 10 years, goes live later this year for the last phase and they just hit their peak volume of 628 billion records in a single day. When I think back to 2014, when the CAT specs were originally written, we were thinking 54 billion records a day. Orders of magnitude have gone up exponentially.

In addition to that, not only do we have to worry about the day-to-day, the settlement issues, the hybrid office, having the resources available and the time, but the operations team also needs to be changing fundamental processes that are ecosystem-based. These changes are not just for your firm – they are also for how your firm works with your clients, your counterparties, and the central counterparties.

As SIFMA’s Tom Price likes to say: losing that last 10 pounds on your diet is the hardest part to do; taking another 24-hours out of the settlement cycle will be a very difficult challenge. And again, it’s the people, business activities and the processes today that will need to change as well as the technology enablement and the behavior of the clients.

Q. How is the role of operations professional evolving to meet these challenges?

A. It’s challenging just getting qualified resources. There are new and diverse opportunities out there for college graduates and the younger generation. How do we make this work [in financial services] interesting to them? How do we make this work happen within a work-life balance that people seek today? I believe we will grow into this new working model. We are still coming out of the pandemic and what we say today and what our policies are today will change.

What it will take is the industry to move towards more real-time data and away from the legacy, batch-oriented systems. As we improve data availability, it will allow people to reskill, have more ongoing responses and strategic activities throughout their day-to-day work.

Bob Walley is Principal, Financial Services at Deloitte and is working with SIFMA, ICI and DTCC as part of the PMO for the transition to T+1.