Custody Conversation T+1 webinar
(DESCRIPTION)
Slide, U.S. Bank, Live Webinar - Custody Conversation on T+1, Wealth, Corporate, Commercial and Institutional Banking (WCIB).

(SPEECH)
KENZIE: Welcome to today's webinar we will give everyone a few more minutes to join. I will be back to formally kick off the webinar.

(DESCRIPTION)
Slide continued. Doug McNaughton, Laura Cote - Brian Baker. March 2024. U.S. Bank, Public Information. The speakers appear on a video call in the right-hand panel of the slideshow.

(SPEECH)
Thank you for joining today's webinar. Please note that this event is being recorded. If you object to this recording, you must disconnect from the event. To ask questions during the event, please submit them using the Q&A chat box on the right side of your screen. Doug, I'll pass it over to you.

DOUG MCNAUGHTON: Great. Thank you, Kenzie. Good morning and good afternoon. Welcome and thank you for joining us today for our Custody Conversation on T+1. Excited to provide information on T+1 with two colleagues that have been instrumental in the overall T+1 Program for U.S. Bank.

During this call, I have the pleasure to be the moderator and will rely on my two esteemed colleagues to provide insight and expertise around the T+1 Industry Initiative. Not sure about everyone else, but this team already has plans for the first unofficial summer weekend here in the U.S., Memorial Day, which we have now deemed the T+1 weekend.

So as we all know, T+1 is going live on May 28, and there will be preparations over the weekend. So further to that, the industry right now, we're 60 days away from T+1 going live. And also, to respond some of the industry chatter that's going on and which is normally present prior to large industry events, there is no expectation that this date will be delayed. We are all marching towards the May 28 date.

So part of U.S. Bank's planning and high-level approach for T+1 has been to consider T+1 is an opportunity and not just a regulatory change. Managing this as an opportunity has motivated the team to be more thoughtful and challenged the current environment. We want to leverage more industry tools, enhance automation capabilities, reviewing all aspects of the DTCC settlement process, including data file exchanges and frequency, enhancing data tables, developing oversight adherence metrics, and refining operating models.

So today during the session, the discussion will cover topics to help inform of the required changes for T+1. We want to share information regarding the T+1 Initiative, review some information around the cut over the weekend, inform and discuss preparation for the final two months prior to live date. The discussion will last approximately 30 minutes, and following will be a Q&A.

As Kenzie stated, please submit any questions via the Q&A chat box, which will be monitored throughout the session. And T+1 information can also be found on U.S. Bank's T+1 Resource Center, which we recommend you visit. There's a lot of good information out there that have been put together through the last two years of this event.

So from an introduction, my name is Doug McNaughton. I'll be moderating this conversation today. I'm joined by two colleagues that have been involved in T+1 since the inception of the initiative. And coupled with their experience and knowledge, they are well-versed in what is required for a successful transition to T+1.

I am based in Boston and have extensive experience in custody and global market operations. I've been with the U.S. Bank for nearly four years and have over 30 years' experience in the industry. So right now, I'd like to take the time and welcome both Laura and Brian. Laura, could you please start off by providing some background on your professional experience?

LAURA COTE: Yes, thank you, Doug. Very excited to be here. Good morning, good afternoon to everybody. Thank you to those in the audience for joining our session and for the opportunity to talk more about T+1 today. My name is Laura Cote. I am a Product Manager within the Chief Product Office at U.S. Bank. I'm responsible for U.S. Bank's custody product strategy.

And I'm based in Boston as well. I have been with U.S. Bank for the past three years and within the financial services industry for the past 20 years. And I'm very much looking forward to sharing more about our T plus 1 journey today. And I'll hand it over to Brian next to introduce himself.

BRIAN BAKER: Hey, Doug and Laura. Thanks for having me today. So I'm Brian Baker. I'm located in St. Paul, Minnesota. I've been with U.S. Bank for nine years focusing on continuous process improvement and technology implementation for roughly the last year, year and a half. I've been focusing on the U.S. trade processing world and the T+1 project implementation.

My background is in custody operations, foreign exchange, post-execution trade processing, and settlement. So appreciate the time and looking forward to the conversation. Thank you.

DOUG MCNAUGHTON: Great. Thanks, Laura and Brian. So now we're going to jump right in. So Laura, now that we are just two months away, can you provide some background on how this initiative has progressed up to this point? Include what the industry has done to prepare and inform the industry ahead of the T+1 migration.

(DESCRIPTION)
Slide.

(SPEECH)
LAURA COTE: Definitely. Thank you, Doug. So I wanted to start this question off with a quick refresher on T+1 and the regulation just so we're all on the same page. It has been two years on this journey, but just want to start by breaking it down a way that we've been talking about T1 with our clients from a regulatory perspective.

So first and foremost, the settlements are going to be happening-- the security settlement in the U.S./Canada are going to be happening on trade date plus one business day. That's first and foremost. The second, that middle column there, what you see affirmations on T, that's another core part of the regulation whereby DTCC has set a 9:00 PM Eastern deadline for that affirmation process on trade day going forward. So we've been having a lot of conversations around the affirmation process in light of this regulation.

And lastly, the recordkeeping requirements, which are really geared towards our Registered Investment Advisor clients, or RIAs, in the need to make and keep records of confirmations and affirmations and the ability to recall those for regulator requests, et cetera. So at U.S. Bank, we actually serve the RIA client base quite heavily within our Investment Advisor Services business, or IAS. So we've had a different outreach for that client type as well here covering, again, this specific part of the regulation.

So I don't want to spend too much time on the content here just given we are only two months away from implementation. Everyone on the meeting today, let's hope, has been familiar with this and really reviewed this within your firm and your shop. So let's talk a little bit about the last 18 months of the process here in terms of where we started. Doug, you asked about the industry and U.S. Bank's journey, et cetera.

So I'd say that the themes from our T+1 Initiative have been in play for quite some time at U.S. Bank. So even before T+1 became a rule written into regulation, et cetera. And what I mean by this is automation efficiency in our operations, partnering with our clients to achieve the same.

Client administration teams, service teams, they have been on this journey with clients before T1 was approved. So as Doug said, we view T1 as an opportunity. So we fast forward to this T1 approval and live date. And really, for the last 18 months, that opportunity for efficiency automation has been front and center. For us, U.S. Bank, for the industry, for our clients continuing on this path. And yes, there is a regulatory component, so we will be compliant in that fashion as well.

We have a very large book at U.S. Bank in terms of our U.S. client base, our U.S. assets. $4 trillion in AUC. Really, a lot of U.S. exposure here. So T+1 is foundational to our book, to our client base, to who we serve. It allows us, the industry, and our clients to get better with the basics, really. Things like standing settlement instructions and instruction methodology, meaning how do you transmit instructions to your custodians? Central matching tools, technology tools that are available in the market that we're seeing more uptake in that facility as well.

So then we'll flip over to our approach and how far we've come as U.S. Bank as custodian on the T+1 journey. So our journey started two years ago. We organized an enterprise-wide project team, and that project team spans multiple disciplines, functional areas like myself from Product, and Doug and Brian. We have Operations teams, Technology teams, Risk, Compliance client-facing teams, et cetera on this journey.

We had governance committees and steering committees, workstreams where we focused on functional areas like foreign exchange, securities lending, ETFs, transfer agency accounting. And also, our European colleagues. So our official journey really kicked off two years ago with the formation of this team, but also an intensive impact assessment to understand how T1 was going to impact U.S. Bank, the clients that we serve.

And the way that we really kick started that was using data. You're going to hear that a lot today around data being the foundation of our client outreach campaign, of our operations roadmap, if you will. It's how we built basically every facet of our T+1 Program or T+1 Campaign.

So at this point, we're in the final stages, and a big part of the program that I was personally responsible with for T+1 was the Client Outreach Campaign. And that started with a more intense approach to outreach and moved into monitoring that we are looking to continue beyond T1. So the point here is we had a very intense outreach period Q3, Q4 of '24 with our client base.

And those best practices and what we learned from that are going to actually bring us into the post-T1 world in terms of this is now a client service best practice for our U.S. Bank client service teams and our client facing teams in terms of monitoring this type of client behavior going forward.

DOUG MCNAUGHTON: Great. Thanks, Laura. Laura, really quick, as I think about this effort and what's going on, we're part of the community and we have to play our role in our community. So how do you view our position, U.S. Bank, and what we need to do to make sure that we're being effective, and also making sure that we're playing that role that where we sit as a custodian bank?

LAURA COTE: Definitely. So we viewed ourselves, Doug, as I mentioned, large U.S.-based custodian with a large U.S. client base. We view ourselves as having a very big role to play in the industry in prep for T1. So what that means for us in terms of doing our part to be compliant for readiness, we took every opportunity to learn. We attended webinars from all different industry bodies and utilities and peer banks and collaborations. A lot of in-person meetings, conferences, and surveys were some of the big ones.

And I would say one of my observations that I've held true to over the last two years is that the industry has really come together over the past year-plus. We've strengthened our relationships as a player in the market here with our clients. We collaborated with all market participants on this effort.

And even though we're not a direct party, we're acting as an agent. We have responsibilities in the overall custody chain. So again, want to make sure being that thought leader with our clients in terms of best practice, recommendations, readiness. So really ensuring that our voice is heard on our observations in the industry-- so through that collaboration and sharing, and also the voice of our clients is heard as well.

So we've had, I'd say, greater relationships with firms like DTC in terms of more communication, sharing of client issues or how a client is approaching a specific situation, and how we want to come together and problem-solve.

We also took this as an opportunity for continuous learning and improvement. What new functionality do we, U.S. Bank, need? What do we want to bring from a business case perspective going forward? Again, in that same theme of efficiency and automation and using data to underpin that.

And then from there, we shaped our messaging on the T1 Campaign using all that content-gathering-- meetings, conferences, webinars, and surveys. And the goal was really to create the best service model that we can to ensure success.

So really, to close this one out, this is one of my favorite topics with all the work we've done in the industry. I'll give you some examples of some of the industry associations that we sit on or where we've contributed. So not an exhaustive list, but the main areas I would say are the large trade associations or trade bodies. We have membership to the International Security Services Association, ISSA. They had a specific T1 Working Group that Doug, you personally have participated.

So we also have a strong partnership with DTC, as I mentioned, that's only gotten stronger through this effort. I'm personally on their ITP Advisory Group, their Senior Advisory Group for Alert. Those were great opportunities for us to share experiences across our peer set, really, with DTC on what we need as the custodian community supporting our clients.

And then another really important one as far as doing our part in the learning and continuing along the journey of improvement is responding to industry surveys. So the value exchange had done quite a few in this area. Also, the ICI. So ensuring that we're sharing where we're at in our journey and being part of that larger industry dialogue and statistics on readiness.

There's also the ISITC conferences we've attended where T+1 has had a prominent focus in the last two years. Our FX team has a board seat on the Global FX Division GFXD, which is part of the AFMI and SIFMA, et cetera. So really feel like we've had, again, this multifaceted outreach approach both with clients and the industry to ensure readiness, success, and best practice.

DOUG MCNAUGHTON: Great. Thank you, Laura. A lot of content there. The next question-- I'm going to stick with Laura, but it's also for Brian here. So we've been trying-- we've been very detailed around our conversations around our distribution of communication, and we want to make sure that we've been not overwhelming, but been very clear and concise. So Laura, talk a little bit about how our approach has been really on providing short, brief, what we call e-blasts going out there, and some of the content there. And then Brian will jump into some of the detail around what are some of the key themes.

LAURA COTE: Yeah. So as I mentioned at the beginning, the data was sort of the foundation or the bedrock of our T1 Campaign. And that intense impact assessment set us up. And from there, we use that data to look at the highest-impact clients, ones that we could see from the data to be the highest needle-movers, highest opportunity for change or risk to ourselves or their process.

So from there, we came up with five different scenarios of where clients could improve, and we mapped clients into one or multiple of those buckets. And we then came up with talk tracks that went along with each. And we wanted to democratize that delivery of the messages to our client-facing teams so they could have those conversations with clients.

So leveraging, again, the client's main contact. And then using this team where we felt that there was more support needed or more questions from the client or the client was weighing their options and wanted more opinions from others that have educated larger client sets.

So they led the initial message supported by us. And as I mentioned as well, we started that outreach in a very targeted manner using that impact assessment of, again, data building on high-risk clients or highest-impact clients, let's say. So very much a one-to-one, Doug.

So we did-- as you said, we did a lot of large-scale communications, but when we say client outreach campaign at U.S. Bank, we mean that one-to-one, let's set up a meeting or talk about your business client, about T1 and what we're seeing. And then-- so that one-to-one Q3, Q4 of '24.

And now, as I mentioned, we're in this Adherence Monitoring Program where we're using data again with these ongoing dashboards that we've created that we're planning to use beyond T1. And this is what we view as part of client service excellence in terms of we want to build this into our client service team's journey so that we can ensure this efficiency and automation that's ongoing.

So as you mentioned, we did want to keep our outreach succinct to the point. We've done checklists for clients. We've tried to boil it down-- Brian's going to cover that as well today. But anything we sent out on a large scale, again, tried to keep that succinct. And then when clients were in those scenarios, we tried to keep that talk track really targeted around what does the client need to do to change? What is the recommendation?

And what I can say is that every client we met with was very different in that regard. Their business obviously looked and felt very different. Their needs were different. So the biggest takeaway I had from the outreach campaign was that it was not a one-size-fits-all approach, and our prep, using the data was very much a group effort each time we went to prep.

So I do want to get Brian's take here because he played a huge role in preparing the client-facing teams and this team for those conversations. And Brian was really at the core of our approach to data strategy for T1.

BRIAN BAKER: Yeah, thanks, Laura. And at this point, I feel like I'm eating, sleeping, breathing data at this point from a T+1 perspective. And I couldn't agree more with your commentary that every client conversation was different from a nuanced perspective. I think the overarching thematic conversations were the same. I think we all understand the end game or end goal for T+1, but it was the OMS systems, the affirmation models, the timing, the communication channels that really differed in those communications or those conversations.

And what we've tried to do is develop a standardized approach for prepping for those client conversations, whether it's client or external advisor, by doing a holistic review of the relationship. So we're looking at things like how are you transmitting your trades today? Are you automated or manual? The timing of the receipt of the instruction compared to expectations. The affirmation models. What TradeSuite ID are you utilizing? The confirms being built from the broker and the times that those are being received.

So it really is a holistic list of, top-to-bottom, are we prepared for T+1? And what necessary changes have to be made to comply. And we've really tried to take that approach in both email and client communication to help drive the conversations forward.

And then I do want to be fair and honest. We haven't always had this data-- when I look back to T3, T2 operating models today, we didn't have this type of emphasis on the data and the communication. And it's taken us a little bit of time to develop. So we really started at a baseline of saying, what is our affirmation rate today and where are we comparing against the market standard? What is our timing, receipt, and confirm-- our affirmation timing? What are our settlement fail rates? And where can we see improvement?

So we've taken that data and we've begun to bucket it, and we've found pockets-- small pockets of improvement in our affirmation rate by identifying a certain group of clients. We've identified areas of improvement within our Core Custody Platform based off of that information. And so, I mean, from my perspective, every decision that we've made in the T+1 Project has been based off of really data mining all of the information from confirm to affirmation to trade instruction from our clients or their external advisors down to the allocation level and the relationship.

So maybe just to take a step back and talk about the industry-level affirmation rates for a second. Recently I heard that there's-- the industry is at 79% affirmation rate. I did see a notification or an email from DTC this morning that stated somewhere between 74% and 75% affirmation rate, but they are expecting to hit that 90% affirmation rate by the T+1 deadline. And I would say U.S. Bank is trending slightly above that market expectation at this point, which is really good to see.

And again, we use this data to help shape-- you said it-- the five pillars of areas of focus for our clients. So to recap, we have an approach for our clients. We really try to take a holistic approach at the relationship. We're using data to make all of our decisions, and I recommend clients do the same. I mean, it's the best possible way to make informed decisions about your business processes, understand the timing, and communication with your custodian and your brokers.

DOUG MCNAUGHTON: No, thank you, Brian. I think one of the things I take away from T2 to T1, we talked about that. And I always look at it, in the T+2 environment today, after trade date, we have 17 hours-- a little more than 17 hours to repair any problems, any issues with the transaction. You go to a T+1, trading stops at 4:00 PM Eastern Time, you have until 9:00 PM Eastern Time to affirm a trade. Now that window shifts from 17 hours to five hours. So there's a lot of requirements out here on all parties to automate, organize, and get everything done quicker.

So having said that, we've given you a lot of background. We're going to give you some more distinct details around things that are needed. Excuse me. So Brian, on that end, let's talk about best practices. Let's go into how we've been educating and what do we feel are the key points to be successful in T+1 as we move forward.

(DESCRIPTION)
Slide, a numbered list.

(SPEECH)
BRIAN BAKER: Yeah, Doug. I mean, these are our four pillars-- or five pillars. These are our focus areas where we can see clients making adjustments to their operating models or improvements to their automation. So I try to put them into bullet points in my mind. So the first is obtaining a TradeSuite ID.

If you're not familiar with a DTC TradeSuite ID, we have an FAQ out on our T+1 website, which details what they are, how to obtain one, and the different types of TradeSuite IDs out there depending on the roles and responsibilities that you want to have in the affirmation process, and the visibility level of those confirms.

And we're really pushing clients off of U.S. Bank's omnibus TradeSuite ID and to obtain their own for two main reasons. One is for that RIA client base to comply with SEC Rule 204-2, which is all about the confirmations, the affirmations, the allocations, and the timing associated with all of those pieces of the transaction.

And then secondly, for those clients that aren't RIAs, it's about transparency for their relationship on the execution itself. And so if you obtain the TradeSuite ID, you can see yourself listed on that transaction alongside the broker-dealer, the executing broker-- your clearing agent, the DTC participant, and us as the agent or the custodian.

And so it just provides that secondary level of, one, transparency, and then two, you can obtain reporting to have better control over the trade execution lifecycle.

So that's the number 1. Number 2 is going to be often overlooked in my opinion, but SSI maintenance, which has historically been a problem as far as manual work. When I talk when-- I think about SSIs, it's PDFs being exchanged between counterparties and custodians or Excel files. And so my first recommendation to everyone is get a copy of your most recent settlement instructions and send them to your holistic list of executing brokers. And when you do that, ensure that those executing brokers have and are utilizing the correct account number from a U.S. Bank perspective.

Oftentimes what we find when we're researching individual client bases is-- or EBs is one or two EBs being utilized may have outdated settlement instructions. And then a piece of that is look at areas of automation for this. I mean, U.S. Bank specifically uses the DTC Alert Platform. We are a global custodian, which essentially means that we can control the SSIs on your behalf.

And so if at any point in time your settlement instructions are updated by U.S. Bank, we will automatically update them in the system, they will feed to yourself or the external advisor, and then downstream to the executing brokers into the trades. So automation in this space can reduce email traffic and ensure that SSIs are accurate at all times.

(DESCRIPTION)
Slide.

(SPEECH)
And then affirmation models. If we can just take a look at our affirmation models from an overall perspective, we really have three. We have two affirmation models that are around client affirmation, and then we have one affirmation model-- down at the bottom there, you'll see it's the U.S. Bank Affirmation Model, which is where our clients or the external advisors want to outsource the affirmation process to U.S. Bank.

I do just want to take a second to hone in on the top two affirmation models and make a distinction around the two. So it's all about what type of trade allocation or trade instruction the client or their advisor wants to send to U.S. Bank. So Auto-Affirmation means that U.S. Bank is going to be receiving an affirmed confirm from the institution, and there's not going to be a follow-up instruction received by U.S. Bank. U.S. Bank is going to take the affirmed confirm and utilize that to ensure a posting to the client's trust account.

Client affirmation requires a secondary instruction from the client or their advisor. So we're still going to get a client affirm to confirm, however, the client has a desire to send a Swift message and FTP file-- maybe if it's a block trading, they're sending their allocations. And so we're not going to be using the affirmed confirm to generate the posting, there will be a secondary transaction and a matching of those two. And I think U.S. Bank Affirmation is pretty self-explanatory. It's where it's outsourced to U.S. Bank.

So the next item for me is reviewing your affirmation timeline and ensuring that you're meeting the T+1 deadlines. Again, that goes back to the data piece that we've already covered. Take a look at your affirmation timelines, your trade allocation timelines, and ensure that you're meeting the deadlines. And then I think this has already been touched on a little bit by Laura in her previous response, but automate your trade instructions if possible.

I'd say U.S. Bank's two most common forms of instructions are Swift and FTP file feeds. The vast majority of our instructions are received via those two formats and it's a preferred methodology. So if possible, look to automate.

So just to recap, establish your TradeSuite ID, manage your SSIs effectively with your EBs and your custodians, select an affirmation model, which are out on our T+1 website, review your affirmation timelines, and, if possible, automate your trade transmission methodology.

LAURA COTE: Yeah. And if I could jump in there, Brian, so what you've covered, we're calling it the five pillars or the checklist. We had a question come in through the Teams chat around where to find the checklist that we keep referring to. So it's what Brian just covered. It's on our T+1 Resource Center online that's public.

I've also had the team-- many of us who are on this T+1 journey share that checklist on LinkedIn as well in a very succinct way, so it boils it down. But hopefully throughout these various different information channels, you can obtain that. We also sent that through the mass mailing, or the e-blast as Doug referred to earlier.

BRIAN BAKER: Yeah. And just one more thing from a follow-up perspective, Laura, there is our trade instruction deadlines are also listed on the T+1 website. I'm searching my memory here, but our automated trade instruction deadlines are 8:00 PM Eastern Time if you're instructing via Swift and FTP-- and/or FTP. And so it's an hour before affirmation deadline.

DOUG MCNAUGHTON: Great.

LAURA COTE: Thank you.

DOUG MCNAUGHTON: Thanks, Brian. Thanks, Laura. So Brian, in really short order, what does a T+1-ready client-- you went through this a little bit-- give a little bit overview of what a T+1-ready client will look like to be successful.

BRIAN BAKER: Yeah, short and sweet. So high affirmation rates. Low settlement failure rates. And then having a well-documented plan internally on their side of the house for business readiness plans, understanding their system enhancements. If they have batch times, taking a look at their batch times and updating those. Reviewing our five pillars to make sure that they've taken a look at each of those and understand where they sit from an operational perspective.

Understanding their cut-over tasks. How is the transitional period from T2 to T1 really going to be handled? How are they monitoring? What are they monitoring? And then really, reviewing your value-added custody-related service.

So when I say value-added, to me, I think of sect lending, foreign exchange, ETF, TA, et cetera. And so from my perspective, FX is a big one for our non-U.S.-related clients. And the biggest thing that I always push there is just understand your workflow and your deadlines.

So U.S. Bank's deadlines for FX is pretty competitive from a euro and sterling perspective where we are executing same-day transactions for those two currencies. And we have, I'll say, a full support FX desk that if you want to deal directly with them, you certainly can. But we're also-- we also have full Swift capabilities in communication with our FX desks. So we can take a trade instruction with an attached 11A request on it, flow that to our FX desk, and ensure that the necessary funding is there for your trade settlement.

So again, review your ancillary services, prepare your business readiness plans. And Doug and Laura, I know, you two are both familiar with different sides of this process, but Doug, you're the sect lending expert. Can you talk a little bit about sect lending? And Laura, you're our EU expert, so can you talk a little bit about that?

DOUG MCNAUGHTON: Sure. No, thanks, Brian, happy to. So from a securities lending perspective, there's going to be required behavioral changes in lenders, borrowers-- excuse me, custodians, broker-dealers, and service providers. That's paramount to mitigate potential impacts. One of the key things is timeliness of executed transactions. Communicate that. Make sure your OMS systems are up to speed, everything's flowing quick and fast. It has to go there.

Clients-- advising of any transactions, are they executed throughout the day? Specifically the cell transactions, to manage availability and help the agent lenders manage that availability. Lending agents need to ensure that the lending system is receiving real-time frequent data feeds of sell transactions from their custodian systems or their custodian that are supporting that client.

Third-party lending agents. They're challenged due to the hops required. They don't have the custody books or records. They're depending on file feeds or instructions from the lender itself. It may require parties to actually set up different feeds to the lending agents to make sure that they're getting them timely.

Right now, the borrower community, they're looking for a deadline of 3:00 PM Eastern Time. That allows them, if they have to go out and source the securities to bring back, that allows them to execute it on trade date and then return it on trade date plus 1. It's seamless. And it also allows, if you're providing that instruction in that timely manner, it allows you to move the liability over to the borrower. So that's important.

From an overall securities market lending deadline, within the old loan net system, currently referred to as the FIS Securities Lending Processing Platform, that deadline is 11:59 PM Eastern Time on trade date to make recalls effective for T+1.

And in the overall scheme of it, you look at lending, general collateral probably isn't going to be the pain points in there. Securities that are easy to borrow, securities that are readily available, it always comes down, and comes down to natural lending, hard-to-borrow securities, securities that are trading at a premium. Those are going to be the ones that are going to be impactful. Those are the ones that you need to make sure and put that onus on and make sure that those are getting returned and notified to everyone timely. So Laura, I'll transition to you for your perspective.

LAURA COTE: Yeah. Thank you, Doug. And before I answer the Europe piece, I do want to just tag on to the T1-ready client just to share that from my perspective, when we met with clients on this journey throughout the last year or so, the ones where I felt would be best set up for success were ones that were reading all the industry information. Ones that, for the five pillars-- I know that's the most simplistic view of readiness. Brian mentioned things like business readiness plans and workflows and operating models beyond just what we see as custodian.

But in my view, when I meet with a client and that checklist naturally is discussed and clients have a plan for increasing their use of industry utility tools where we feel this is going to be a mitigant to fails, those are the clients that I feel we can check the box and say, OK, we feel good about this client because we went into that meeting with that checklist and they were either already familiar with all five, they had a plan to work on some of them, or were they weren't quite ready, again, had a plan, or there was an alternative, let's say.

So on Europe, though, to answer from that perspective on the client side, our European meetings have looked very different from those U.S. Meetings where we talked about the business readiness plan. So these are our fund clients in Europe-- in Luxembourg and Ireland. And as such, these clients wanted to talk about their entire fund lifecycle or architecture or workflow, what have you.

So the more high-level discussions we've had around T1 with our U.S. clients, it was very detailed with our European clients. It involved more groups to come to the table to have those conversations around the timings and the mechanics, especially when we weren't the fund admin or the TA, and vice versa when we are.

So it was another flavor of readiness for those clients in terms of thinking bigger beyond just the U.S. settlement process or the Canadian settlement process. So those considerations, things like the timing of the NAV, should there be a change to the client NAV timing? Some decided it was OK in the European morning. Some wanted to bring it up that were later in the day.

So we've seen, again, not a one-size-fits-all, but really a case-by-case basis of what's going to work for that firm and where their operations are and where they have folks doing the work.

Another functional area for EU client consideration is the TA space. So the timing of subscriptions and redemptions on a T+2 basis. And again, are we the TA are we not the TA? How can we help facilitate? How do we help mitigate any risk there?

And then lastly, the UCITS regulations are going to be tested with T1 because we have the 20% overdraw limit, the 10% cash on-balance limit. And that all comes into effect with the TA timings where we see that cash moving, or with an FX to fund a transaction. So FX being another key area-- lending being another key area that's going to affect the timing. But FX affecting liquidity and if that trade can actually settle based on is it funded?

So the FX group and our partnership with them, and as Brian mentioned, for the large currencies like GBP and euro we're pretty competitive with the settlement date FX, but for the other markets, et cetera and other currencies, et cetera, it's understanding that workflow and timing. And our best practice has been instruct timely or early has been the messaging there.

So really excited to watch the European space overall, though, with not just the prep for T1, but their settlement cycles being misaligned for some time following ESMA and the regulatory authorities there in terms of their time frame.

DOUG MCNAUGHTON: Great. Thank you, Laura. So I'm going to transition over to Q&A in a second, but really quickly, I'm going to ask Brian, then Laura. Brian, three seconds, what's your top recommendations? If you had to summarize what you said, what you think are the key points to move forward or for the audience today?

BRIAN BAKER: Yeah, absolutely. So evaluate your business readiness plans, optimize system performance, review your affirmation models, and review your U.S. Bank's five pillars to ensure that you align with those five pillars. Those are the key areas of impacts that I can see that would drive success for T1. Absolutely.

DOUG MCNAUGHTON: Great. Laura?

LAURA COTE: Yep. I'm going to repeat myself again because I want to make sure that this is clear coming out of this session, that I think our checklist, put it best-- I think, Brian, you have that in your answer, too. So our five takeaways that Brian mentioned, the checklist, these are the tools or building blocks to a successful T1 implementation. We broke that down for you. We're trying to make that easy for you.

Please utilize the content available in the industry. DTC has a T1 dedicated website. We have a resource center. There's a ton of information on LinkedIn. There's industry information, there's sessions. Take advantage of all of that. If you're still not, let's say, sold on your response, let's say, or your workflow, if you still have more work to do as a shop, there's a ton of information out there. And obviously utilize the team. Utilize your client-facing team, and where necessary, this team also has been able to assist with client meetings.

(DESCRIPTION)
Slide, Q&A?

(SPEECH)
DOUG MCNAUGHTON: Great. Well, thank you for that. Now let's jump into some of the Q&As that we've got. So one of the first ones was looking at here, there was a question, will there be a change in the timeline for RAD approval for night cycle processing? So on that one from Laura or Brian.

LAURA COTE: Yeah. I mean I'll start and maybe I'll hand over to Brian because he's more of our technical expert, but I would say on the DTC side for the affirmation process in terms of the 9:00 PM affirmation and if that is missed, what occurs at that point is the trade will go into DTC's overnight cycle. And it's not guaranteed I think it is the big message here. That it's not that it's not going to settle. It's just that we can't guarantee settlement.

But Doug always puts it best here, is that affirmation doesn't always equal settlement, and non-affirmation doesn't equal failure. So there is a change on the DTC side if that affirmation is missed after 9:00 Eastern, that it goes into their overnight cycle. There's some differences in charges on the custodian side, not for clients specifically, but there are higher costs that we would face if that was missed as well. And Brian, I don't know if you want to add something on the RAD piece specifically.

BRIAN BAKER: Yeah. I mean, from my perspective, I agree with everything you said, Laura. I don't have a ton of experience with RAD. I just have the experience with the affirmation timelines itself, the NDO, and the DDO timing. And so-- and I also agree that there's a cost differentiation if you miss that affirmation window to begin with.

But we can certainly follow up with our Settlements Team and see if they're going to experience any-- they have any expectations on the timing changes and post a follow-up to this, absolutely.

LAURA COTE: Yeah. And Doug-- sorry, were you going to add something there, Doug?

DOUG MCNAUGHTON: --go ahead.

LAURA COTE: OK. I was going to say, I'm going to grab another question here from the rail if that's OK and take it from here. So question here about TradeSuite ID, which is one of my favorite topics, which is why I wanted to grab it. So this firm has a TradeSuite ID. It's the ID-only version. And the question is, what do we do with this ID in order to have it attached to our trade?

So I think Brian and I can tag-team this one, but you want to make sure that you communicate that unique ID that your firm has applied for to your custodians, to your brokers to make sure that it's input into the right field on the transaction.

And we have actually a workflow or a process at U.S. Bank where we want to receive-- we want your client-facing team, either your client administration team or your trade services team depending on which team you work with at U.S. Bank, you want to make sure you give that to them ahead of time so they can work it in on our end on our system. Brian, you're probably more eloquent on the process there, but just wanted to hand it over to you.

BRIAN BAKER: Yeah. From my perspective, it's a workflow. So when you are issued your ID-only TradeSuite ID, you should first communicate that to your custodians to ensure that they have that set up on their system and we have the affirmation model in our system established. The way that I see it is then once it's established, we would communicate back to you that, hey, your TradeSuite ID is set up in our system, your account has been coded accordingly.

And then you can go out and communicate to the brokers. The risk of communicating them out to the brokers is that when the confirms are generated or received into our system, we won't necessarily know who that TradeSuite ID belongs to or won't be able to acknowledge it and link the transactions.

So it is a bit of a workflow, but if you have your ID, open up a line of communication with the U.S. Bank and we can get the account set up with the correct TradeSuite ID and affirmation model.

DOUG MCNAUGHTON: Great. I know another question that seems to be surfaced is link to our resource center. We will make that available. It's been communicated with a lot of our information we've already sent out, but we will make that available, along with the slide deck that we're talking about here today, and the affirmation models. As we mentioned, all that information is within our resource center, but we will make sure that that's available.

Another question that's been coming up, Brian, a little bit-- and I know we've done a lot of work on this-- with the extension there where everything's happening on trade date now up until 9:00 PM, we've talked a lot about how do we move that needle? How do we do coverage? What are we doing on that end? Explain a little bit on our plan and how we're going to cover that throughout that period.

BRIAN BAKER: Yeah, absolutely. And we're developing a bit of a follow-the-sun model, if you will, for lack of a better term. And so we have East Coast, Central, and West Coast coverage, and we intend to make use of each of those locations to really transfer the work associated with the affirmations, the trade processing.

From what I've seen, just looking at the industry, there is a large end-of-day cleanup that's taking place post-market close. And so you're really looking at that 4:00 PM to 6:00 PM Eastern Time as really the heaviest window of confirms being generated and trades being sent to the custodian.

And so to do that, we're, like I said, shifting the work to try to support that busiest timeline to where we are going to have the most operational coverage from an our perspective.

DOUG MCNAUGHTON: Great. And some of the questions, as I'm looking at them, there's certain questions that basically like TradeSuite ID-- around TradeSuite ID. If you have specific questions around TradeSuite ID, whether you have one or not, feel free to reach out to your client service representative and we'll make sure that we get back to that. As we were talking earlier, a lot of these situations are unique client to client, so we need to do that.

There was another question around TradeSuite ID, Brian. So if you're a client you have a TradeSuite ID, where is that TradeSuite ID from a confirm get located versus the custodian TradeSuite ID?

BRIAN BAKER: Yeah, and I always think it depends a little bit on the system that you're utilizing, but traditionally from our perspective and our system, it's listed as institution. Alert, the DTC alert product, it's listed as the institution, slash, broker ID field. So it's most commonly known as institution ID from my perspective. And then just to speak a little bit around where you can potentially find a list if you have a TradeSuite ID.

So if you have access to the DTC platform, they do make reporting available for TradeSuite IDs in a few different fashions. So you can see institutions and their TradeSuite IDs, and then you can see institution, broker-dealers, interested parties as well on the associated report. So I'd recommend-- if you don't have access to DTC's website, you go out there, obtain access, develop a login, and try to find the reporting. Again, if you have specific questions, like Doug said, feel free to reach out, happy to review the reporting and see if you have a TradeSuite ID set up. And also to have a look at the system that you're utilizing and best try to place a TradeSuite ID in that confirm.

DOUG MCNAUGHTON: Great. And Brian, there's one other question that popped up that I thought was very interesting. If there is an Auto-Affirming client, instructions get sent over to us automatically, but if there's problems with the broker information and they're aligning it to the wrong account or different things in there-- I think there's a couple things.

The first thing I would say is, that's where Brian was mentioning it's paramount to have your SSIs complete, accurate, and up to date, and also doing that review with your counterparties as soon as possible prior to T+1. But also on that end, if that happens and there is an issue, are we able to accept instructions in a non-- in an Auto-Affirmation model?

BRIAN BAKER: Yes, absolutely, but it just increases the risk. So because you're in the Auto-Affirmation model and the postings on your account are triggered by affirmed confirms, if you do send us an instruction and we process that manually, and then there is an affirmed confirm that's generated by the broker-- I guess the broker would generate the confirm, you would affirm it, then it could hypothetically duplicate the transaction on your account.

And so that's why I say it introduces risk. So you really have to pay attention to what's being posted on the account. Are there duplicates? And trying to minimize the manual processing for that Auto-Affirmation model.

DOUG MCNAUGHTON: Great. Now there's one other question-- Laura, I want you to--

LAURA COTE: Yeah. I've got a bunch I want to cover, OK. All right. So first and foremost, just a quick housekeeping one. There's been quite a few questions about the resource center. So I have been replying to folks in the chat with the link as well. It's on our LinkedIn. We'll send it through after the meeting with the slides, that there's also been a request for the slides. Absolutely we can post that to the website as well.

So just wanted to make sure folks were aware. The checklist is also out online. It's in the slides, on LinkedIn. So I think once we get that package out the door again, that should clarify. But a question came in about the affirmation process.

So when U.S. Bank is the affirming party, which is one of our approved models that Brian went over, how will the RIA-- so this is for the registered investment advisor community of clients, how will the RIA receive the affirmation time stamp record for RIA recordkeeping? So excellent question here.

And this is where TradeSuite comes into play. This is where you will need your own institutional ID so that you have access through DTC's TradeSuite Archive product to go in and grab those confirms and affirms and timestamps at the request of a regulator, et cetera, or your own workflow. Maybe there's an internal workflow that you're going to be backing those up or saving them.

So I would definitely check out the TradeSuite FAQ that we make available on our website. That would be our recommendation, is to ensure that your TradeSuite Archive usage is open, let's say. Brian, anything to add there or Doug?

DOUG MCNAUGHTON: And Laura, I would say on that, that's associated with Rule 204-2 that requires the RIA to do that. And U.S. Bank isn't going to be in a position to provide that information, so it is requirement for the RIA to actually obtain the TradeSuite ID to have that archiving information availability and capabilities.

LAURA COTE: Yep. Yep, and there's a question, too, in that same kind of vein about U.S. Bank affirming, so I want to make sure that we answer this one. So the question is, what is the time deadline on trade date, on T, to communicate trades where U.S. Bank affirms? So again, U.S. Bank is going to be the affirming party. Brian, correct me if I'm wrong here, but the trade deadlines remain the same, they're universal irrespective of who's doing the affirm process.

And Brian went over those deadlines for the automated clients, for clients who are sending us Swift or FTP, it's 8:00 PM Eastern on trade date, on T. For a non-automated, means 5:30 PM Eastern on T. So that should-- and again, this is on the FAQs on the website, et cetera, but just wanted to clarify that that will not change if U.S. Bank is doing the affirm, that deadline is going to be the same.

BRIAN BAKER: Yeah, that's correct. The deadlines are agnostic to affirmation models, so completely agree with your commentary.

LAURA COTE: Thank you.

DOUG MCNAUGHTON: OK. We're at time. We've covered a lot. We're going to send the information off. At this time, I just want to say thank you. This was a pleasure hosting this discussion today. U.S. Bank is here to assist our clients in their T+1 journey. Please contact your service representative for any questions or information related to T+1, and, as we mentioned a few times, leverage our T+1 Resource Center. If you get stuck, you require any information, you want to have a discussion, reach out. We are here to do that.

We recognize this is a big change. T3 to T2, it really wasn't that substantive of a move. This one is. This one is impactful. It's impactful across-- there's questions across mismatching, across time zones, different countries. We have that-- we recognize Asia has a lot of challenges, Europe has a lot of challenges. How do they manage their process? How do they manage their FX activity, their trading activity? Do they need to open up shops onshore here in the U.S.?

So there's a lot of different things out there that a lot of people need to consider, and that's going to be based upon the office themselves, the firm themselves, and what they decide is the best way to move forward. But there's what to T+1. So again, we're at 60 days out. We're there at the crunch time. We're here to help. Let us know if there's anything. And on behalf of Brian and Laura, thank you very much and enjoy the rest of the day.

(DESCRIPTION)
Text, The live event has ended.