SSI Automation in a T+1 Settlement Age

Worldwide, financial markets are driving towards shorter settlement cycles. The SEC mandate effected in May 2024 has already spurred the transition to T+1 for the US, Canada and Mexico, and T+1 and T+0 settlement is becoming standard practice across other markets worldwide. In the UK and Europe, the T+1 target of October 2027 presents new challenges for a complex web of settlement agents.

For most firms facing a T+1 reality, the automation of manually processed SSIs is one of the key areas to address as part of their planning.

Manual SSI processing: The elephant in the room

Despite the general trend towards SSI process automation, several intractably manual elements continue to pose the biggest barriers to achieving T+1. Industry-wide, T+1 taskforces have identified manual handling of SSIs as a primary cause of operational, settlement and counterparty risk, and a third of all settlement failures are a direct result of missing, incorrect or invalid SSI details. In fact, up to 40% of a large financial institution’s SSI volume is still received and processed manually, adding significantly to delays and risks.

Receiving SSIs manually in non-standard formats and sharing them on unsecured channels introduces operational risk and overhead for the receiving party. Issues include the misinterpretation of instructions, the unauthorized interception of sensitive information and the operational challenges of storing and accessing unstructured SSIs .

Interpreting and re-keying SSI data manually creates many drawbacks. The process presents more opportunities for human errors and invalid SSIs throughout the settlement process and inflates overhead by requiring re-keying and performing 4-eye checks across multiple documents, markets and instruments. Cherry-picking markets for set-up only delays the pain of manual re-keying as teams conduct frantic and time-consuming searches to find the relevant SSIs as other markets move in scope.

Reconciling and authenticating SSIs manually, particularly for cash markets, is incredibly resource-intensive, and often creates friction with clients. The call-back process is a relic of the past that has persisted through both a lack of alternative and a resistance to change, and it's one the industry will ultimately need to minimize and phase out in a T+1 environment.

The challenge of the adoption "long tail"  

There are already existing technology solutions available (such as DTCC Alert) which would, if adopted en masse, offer an elegant solution to the considerable challenges of T+1.

But swift mass adoption is unlikely. The reality is that those who don't yet have a solution in place are unlikely to change their behaviours. These market participants typically have lower trading volumes, fewer legal entities and less of an operational need to adopt a technology solution. Simply put, the cost-benefit equation is different for these entities than for their larger counterparts, and their adoption paths will inevitably be slower. Email remains the most convenient way for them to share their SSI data, and they will continue to do so until a simpler method presents itself.

If an industry-wide behaviour change is unlikely, how can banks prepare to meet their settlement obligations? By looking to their own processes and applying technology solutions to specific aspects of their operations.

Where T+1 ambition meets operational reality

There are three key areas where technology can optimize, streamline and simplify existing SSI processes:

Data capture and extraction

AI offers the means to extract structured SSI data from a range of unstandardized formats. Machine-learning and rule-based models are now sophisticated enough to tackle the nuance and ambiguity of different formats and nomenclatures. This reduces the operational burden placed on existing SSI operations teams, eliminates human error and creates a digitized output that can potentially be pushed to multiple locations simultaneously.

Data validation

Effective SSI validation acts as an early-warning system, identifying potential settlement breaks before they become a problem. Rule-based validation checks built on standard practices and industry conventions can automate the process of verifying the structure and content of SSIs. For firms that don't have a trusted, golden source for this information, a robust and systematic validation check is the next best alternative for reducing settlement risk.

Data authentication

The current authentication or call-back process, particularly for cash SSIs, is widely recognized as archaic and ripe for change, and technologies now exist that can replace this time-consuming approach. Secure client portal and outreach technologies provide a readily accessible framework for providing SSIs via an authenticated channel while bypassing the need for a utility platform.

T+1 technology: Build or buy?  

For T+1 taskforces deciding whether to build or buy an automated SSI solution, here are some key considerations.

Operational scale. T+1 readiness is not a challenge that can be solved by AI alone. LLM-enabled data extraction must co-exist with data transformation tools, SSI validation logic, robust system controls and the ability to integrate into existing systems and data stores. An out-of-the-box solution that addresses all of the above, not just AI-enabled data extraction, reduces internal resource alignment and increases speed to market.

LLM strategy. LLM technology for data extraction is now table-stakes. The real differentiation comes from the size and variety of the dataset that it is trained on. Here, industry solutions have a clear advantage, because they are trained on broader datasets, powered by models that are federated across multiple organizations and privy to a broad range of insights from participating organizations and vendor SMEs.

Network effect. An industry solution supporting a broad client base also benefits from a centrally maintained SSI validation ruleset that adapts and evolves as market conventions and regulatory standards change. . An in-house solution is simply unable to replicate this breadth and flexibility in its own ruleset.

Cost benefit. An industry solution offers pricing predictability, while internal builds are notoriously susceptible to delayed go-live dates and ballooning resourcing costs. The right industry solution delivers a proven return on investment through reduction in manual operational effort, reduced settlement/operational risk and a better client experience.

SSI Automate:  An all-in-one path to automation

SSI Automate is S&P Global's answer to T+1 readiness. Through an innovative partnership with SSImple, the industry’s most advanced SSI validation engine, SSI Automate combines AI extraction robust SSI validation rules and a secure reconciliation portal to facilitate effortless, auditable STP for SSIs. Key capabilities include:

• An AI-driven extraction process that reduces the operational overhead of data capture by 90+%
•  A network of 40,000+ financial institutions that support seamless outreach and counterparty workflows
• A set of 2000+ rules that validate SSI data using up-to-date market data and feedback
• Transparent audit trails that capture all data lineage and activity
• An integrated outreach portal that facilitates streamlined reconciliation of invalid SSIs and provides a secure authenticated channel for receiving client SSI information

SSI Automate enables firms to achieve the key capabilities required for T+1 and beyond: an automated process for extracting, validating and authenticating SSI data and a centralized repository where that data can be accessed at any time.

SSI Automate is built on CLM Pro, S&P Global's flagship platform for client lifecycle management, providing firms with the scalability to plug automated SSI workflows further upstream in the trade lifecycle, and combine with regulatory, legal, tax and KYC information to build a holistic client picture. 

The "atomic" future for settlement processes

The T+1 transition is motivating firms to modernize technology across the trade lifecycle and ensure their systems and personnel can handle compressed timelines.

Even as T+1 becomes the global standard, the journey towards ever-faster settlement continues. The foundations for T+0 are already being laid, with same-day settlement a reality in some markets and "atomic" T+0 being target state for many. In the future of settlement, there will be no buffer for mismatched instructions in a T+0 environment: errors will mean instant trade failure, leading to knock-on liquidity and credit risk.

As firms prepare for T+1 and beyond, they need to focus on three core capabilities:

Pre-trade validation that verifies SSIs earlier, ideally as part of customer onboarding journeys.  This will help to identify and neutralize potential risks before they become an issue.

A centralized SSI repository that serves as a golden source of validated, authenticated settlement instructions.

Change management strategies that embrace emerging and disruptive technologies, such as DLT for incorruptible SSIs or LLMs for SSI data extraction and standardization, that challenge the existing status quo.

SSIs are a critical component in the accelerated settlement journey, and firms must work towards elimination of the manual interventions that stand in the way of compressed timelines. Making the right choices about T+1 today is not just about meeting regulatory imperatives. It's about ensuring your firm is ready to embrace the advantages of increasingly lower risk, improved liquidity and greater market resiliency.