The Securities Services Evolution 2023 report by Citi Securities Services provides a comprehensive overview of the ongoing transformation in the financial industry. From being on the cusp of change in 2021 to the execution-focused approach in 2023, the industry is undergoing significant shifts.
A major highlight is the industry’s preparation to reduce a day from the settlement cycles of the world’s largest capital market. This move is in anticipation of imminent changes in other settlement cycles, the adoption of digital currencies, and the potential for atomic settlement within the next half-decade.
Central Securities Depositories (CSDs) worldwide are grappling with two primary challenges: accelerating transformation and innovation, especially in settlements and digital assets, and transitioning from outdated infrastructures. The focus is shifting from managing individual platforms to overseeing a broader ecosystem.
Geographical nuances exist. Latin America is witnessing a significant consolidation project involving Colombia, Peru, and Chile. Europe is reevaluating the benefits of clearing competition. Meanwhile, Asia and Latin America are driving financial market participation through digitization, whereas North America and Europe are emphasizing common industry platforms.
The report indicates a strong trend towards shorter settlement cycles. A staggering 89% of survey participants anticipate their local settlement cycles to transition to T+0 or T+1 within five years. This shift will have profound implications, affecting various departments within organizations differently based on their global location.
Distributed Ledger Technology (DLT) and digital assets are gaining traction. In 2023, 74% of respondents are involved in DLT and digital asset initiatives, up from 47% in 2022. While cryptocurrency activities persist, the industry’s focus seems to be shifting toward DLT and tokenization. As these technologies transition to live environments, the industry is optimistic about operational digital cash within five years, facilitated by Central Bank Digital Currencies (CBDCs) and other commercial mechanisms.
The report concludes that the future momentum of DLT and digital assets hinges on the sell-side’s ability to engage the buy-side effectively and the potential to modify industry processes to harness the advantages DLT presents.