(Bloomberg) -- State Street Corp. has spent more than a year preparing its technology for faster settlement times, joining a slew of financial institutions making adjustments to avoid failed trades that could occur as a result of new regulations that come into effect late May. 

A big part of the company’s process is making sure its technology can support the one-day settlement cycle that will soon be put into force, said Jeff Sardinha, managing director and head of ETF Solutions, Americas. His team, which he said services 45% of global exchange-traded fund assets, is enhancing two platforms to reduce counter-party risks, trim processing time and help lower costs. 

Some of the changes include moving up the order-taking window to 7:30 a.m. New York time from 9:30 a.m., and having staff work in shifts.

Asset managers, banks and brokers across the globe have been getting ready for the US’s massive move to a speedier settlement cycle known as T+1. UK’s Jupiter Asset Management is buying dollars in advance of trades, Baillie Gifford is moving staff to the US and Societe Generale SA is extending the hours of a night shift team. Global investment houses still fear a higher rate of settlement failures because of the change. 

The shift is said to be tricky for US-listed ETFs holding overseas assets. That’s because even if transactions in shares of the ETFs settle in a day — down from two currently — trades involving the underlying assets will still take two or more days to go through, depending on where they’re listed. It won’t be as much of a hurdle for funds holding American assets, though. 

Sardinha is confident State Street is prepared for the change.

“Compressing the settlement cycle to T+1, although complex, was the natural progression,” he said in a video interview from Boston. “State Street took the opportunity to lay some of the groundwork for the eventual move to T+1 back in 2017, when the industry moved from T+3 to T+2.”

Preparing for T+1

State Street is focusing on enhancing two platforms: Fund Connect and the ETF Global Platform. The former is the firm’s primary-market ETF order-taking portal while the latter is a proprietary platform used for basket creation, in-kind trade creation and reporting.

The upgrades for Fund Connect include moving the order-taking window earlier for any shortened settlement orders, Sardinha said. This includes having some of their staff work at 7:30 a.m. New York time. While the firm won’t be adding new employees, he said they will stagger the hours of their roughly 175 staff members globally to ensure all bases are covered. The firm also expanded usage of the platform to Asia.

For the ETF Global Platform, Sardinha’s team is making sure they can reduce the collateral outlay of US-listed ETFs holding global assets with mismatched timing. Otherwise, a mismatch could be a headache for the liquidity providers who serve as authorized participants. 

State Street will “allow for more timely calculation of collateral, as well as same-day returns of collateral overages,” Sardinha said. The firm used to do collateral calculations once a day, which would lead to delays if trade settlements were done after that. Now they’re more efficient, a change Sardinha reckons could save APs and market makers money. 

--With assistance from Emily Graffeo.

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