February 13, 2026

T+1 Settlement Readiness: How Can Custody Technology Improve It?

What is T+1 settlement readiness?

T+1 settlement readiness refers to a firm’s ability to complete the full trade settlement process one business day after trade execution. It requires intraday trade confirmation, reconciliation, and settlement across brokers, custodians, and depositories as part of the T+1 settlement cycle.

This matters because shorter settlement cycles reduce systemic risk while increasing dependency on real-time processing, custody operations automation, and post-trade automation. Operationally, T+1 removes the buffer that many post-trade processes rely on. Breaks that once surfaced overnight must now be identified and resolved within the same business day. Any delay in confirmation, reconciliation, or data handoff immediately increases settlement risk.

How does the T+1 settlement cycle work?

To understand readiness, it helps to clarify what is T+1 settlement at a process level.

The T+1 settlement cycle includes trade capture, confirmation, affirmation, reconciliation, and final settlement, all completed by the next business day. Activities that previously occurred sequentially must now run in parallel. This compression reshapes trade lifecycle management. Dependencies across front office, custody, and post-trade systems become visible much earlier, increasing the need for coordination and automation.

Why does T+1 settlement increase pressure on custody operations?

T+1 reduces the time available to identify and resolve settlement issues. Processes that relied on overnight batches or manual reviews now operate under intraday constraints. Shorter settlement cycles amplify operational and liquidity risk when post-trade workflows remain fragmented. Minor data inconsistencies that were previously manageable can lead to failed settlements under T+1.

For providers of institutional custody services, this pressure is compounded across markets, asset classes, and currencies. Consistency and predictability become as critical as speed.

Why do manual custody processes struggle under T+1 settlement timelines?

Manual custody processes face structural limits under compressed timelines. Batch-based workflows delay issue detection, leaving little time for resolution. Manual reconciliation and messaging increase dependency on operational effort, which does not scale reliably with volume.

Fragmented systems further limit intraday visibility into settlement status. This makes proactive intervention difficult.

Analysis from McKinsey & Company shows that many settlement failures originate from upstream data inconsistencies rather than execution errors. Under T+1, these inconsistencies surface too late to correct manually.

How does custody technology and post-trade automation improve T+1 settlement readiness?

Custody technology improves T+1 settlement readiness by restructuring how post-trade activities are executed across the settlement window. Instead of relying on sequential, end-of- day processing, modern custody platforms enable real-time trade validation, confirmation, and reconciliation to occur intraday and in parallel. This shift is critical under T+1, where delays cannot be absorbed by time and must be addressed within the same business day.

By embedding post-trade automation into custody workflows, firms reduce dependency on manual reconciliation, spreadsheet-driven controls, and reactive exception handling. In manual custody models, batch processing delays issue detection and concentrates risk near settlement cut-off. Automated custody models operate continuously, allowing exceptions to surface earlier in the trade lifecycle when there is still time to act.

Automated confirmations, intraday holdings reconciliation, and rule-based exception routing improve visibility and control across markets and asset classes. According to PwC’s 2023 post- trade modernisation research, firms with higher automation maturity resolve settlement exceptions faster under compressed settlement timelines. Automation does not eliminate settlement risk entirely, but it significantly reduces reliance on last-minute recovery and supports more predictable outcomes under T+1 settlement compliance requirements.

What framework can firms use to assess T+1 settlement readiness?

A structured readiness assessment helps identify constraints early.

Stage 1: Trade Capture and Validation

Trades must be enriched and validated immediately after execution.

Stage 2: Intraday Confirmation and Matching

Confirmations and affirmations should complete within market hours.

Stage 3: Continuous Reconciliation

Holdings and transaction reconciliations must run intraday rather than end-of-day.

Stage 4: Exception Visibility and Ownership

Breaks should surface early with clear accountability for resolution.

If any stage relies on overnight processing, T+1 readiness is limited.

What else is required alongside custody technology for T+1 readiness?

Custody technology is a critical foundation for T+1 settlement readiness, but it does not operate in isolation. Even the most advanced platforms depend on accurate reference data, clearly defined ownership, and disciplined operating processes to deliver consistent outcomes under compressed settlement timelines.

Technology cannot correct upstream data issues on its own. Incomplete or inconsistent static data, unclear counterparty mappings, or delayed data inputs can still introduce breaks that require human resolution. Similarly, when ownership across trade capture, settlement, and reconciliation is not clearly defined, exceptions may stall despite strong system capabilities.

That said, modern custody platforms are designed to surface these issues earlier and more transparently. By providing real-time visibility, audit trails, and workflow controls, custody technology helps organisations identify where governance or data gaps exist and address them systematically. Market practices, data quality, and cross-team coordination remain essential, but custody technology plays a central role in enabling that coordination and supporting more resilient T+1 operations.

Conclusion

T+1 settlement readiness depends on a firm’s ability to execute the full settlement process intraday with minimal manual intervention. Compressed settlement cycles expose weaknesses in fragmented and batch-based custody operations. Custody technology improves readiness by enabling automation, real-time processing, and earlier exception detection across the trade lifecycle. In a T+1 environment, predictability and control matter more than speed alone.

Can your organisation identify and resolve settlement risk early enough to protect capital, clients, and reputation?