While US investment firms remain committed to achieving straight-through processing, a majority believe that a mandatory shortening of the settlement window to T+1 will increase overall risk.
Despite the postponement by the Securities Industry Association of an earlier T+1 deadline for 2005, 74% of executives say the commitment of their firm to STP has either stayed the same or increased.
But when asked whether T+1 should be mandated, 53% of executives opposed a mandate, while 47% supported mandating T+1. Fifty-six percent of executives believe shortening the settlement window to T+1 will increase overall risk.
The findings stem from a survey of 90 industry participants by Deloitte & Touche.
Dawn Patterson, principal and co-leader of Deloitte & Touche's STP practice, comments: "Because T+1 calls for financial services firms to be both internally and externally ready - and relies on all industry participants to be so - executives may have concerns about the risk they face when interacting externally with other market segments."
Despite the misgivings, firms are continuing to invest in STP. Almost 40% of executives say that their firms will spend more than $1 million on their STP initiatives and 37% say that an additional $1 million or more will be committed to settling on T+1. Among firms with more than $100 billion in assets under management, 59% of executives expect their firm to spend more than $5 million to achieve STP, while one-quarter of these executives expect their firm to spend an additional $10 million or more to achieve T+1.
Executives rely on a variety of approaches to their STP initiatives, rating middleware (80%), internal development (60%) and vendor packages (58%) as critically, or very important to their firm's STP efforts.
While 65% of executives believe their firms will achieve STP by year-end 2004, few expect other securities industry companies to be ready within the same timeframe.
Lack of integration remains a key concern, with more than half the respondents looking for more interaction with financial reporting, customer services, compliance, and portfolio analysis.
"With the foundation for STP in place, firms should now turn to the unfinished agenda of integrating STP with major activities and functions," says Patterson. "Although all firms will benefit from having an STP environment, we understand the practical reality that it may not be cost-effective for every process in every firm to be straight through. Each internal STP initiative should be analysed to ensure that the benefits are worth the effort, time and cost associated. However, we believe that completely ignoring STP would leave an organization unable to compete."