With the industry-wide T+1 transition only a year away, many firms are in the midst of preparing their operations for the shift in trade settlement timelines. Initial assessments and initial builds may be underway, but firms should also start shifting their focus toward testing. Conducting preliminary internal testing will allow firms to identify large systemic issues as well keep key stakeholders engaged in the settlement transition. The old T+2 testing playbooks are not sufficient to cover all the nuances of the T+1 shift. We have identified several key actions that need to be taken during this internal testing window. Implementing a successful internal testing phase allows firms to reduce their dependence on industry testing and promote greater chances of success ahead of the go-live date.
Key Internal Testing Actions
1. Testing Program Design
Internal testing allows time to bring together and engage the stakeholder group affected by the upcoming trade cycle change. Appointing responsibility, developing leadership, and setting out a firm-wide timeline to finish integration and implement testing is essential to staying on target with the May 2024 go-live date.
- Is there a PMO and governance plan already in place?
- Has the scope of functional areas to test been determined, and their respective testing timelines been set?
- Have teams been established to work with the business leaders to address issues that will come out of testing?
2. Testing Environment Development
Establishing proper internal environments and test types (SIT, UAT, Performance, etc.) are important actions firms need to be taking now. Determining the needs of various systems owners, establishing how the end users will now function in a faster trade cycle, and developing protected environments that can be fed the proper data and scaled up later are key steps towards the end goal of migrating to T+1. It also should be noted that compressed timelines should stress the need for accelerated defect triage, fixing, and re-testing.
- Are proper UAT requirements gathered, and test scripts created for all users/testers?
- Have dependencies been considered and spaced appropriately for testing?
- Have you engaged with vendors and discussed testing and test scenarios with them?
3. Procedural Review and Testing Scripts
Firms also need to work with the various functional areas affected by the shortened settlement period to actively plan and test new procedures. Firms should put measures in place to document failures, bugs, and clogs in the system that may appear during internal or industry testing.
- Does the information flow between systems correctly?
- Are there comprehensive reporting systems and failure logs?
- Is there new training needed for new workflows or new teams?
4. Key Scenarios and Regression Testing
Additionally, firms need to prepare for varying trade types and abnormal scenarios that would affect their ability to close trades. These could be system level issues such as application failures, delays, or data overloads. There could be data integrity issues where old data controls are not functional in the new timeline. There could be abnormal scenarios such as holidays, cross border transactions or end of day trades that could throw off the settlement closings.
- Have the weaknesses been identified, and resilience procedures been built out?
- Are there events or scenarios that should consider internally ahead of the industry testing?
- Are any controls or systems going to be disrupted by a faster settlement cycle?
5. DTCC Industry Testing Preparedness
Finally, it is important to consider how best to maximize participation in industry testing. Firms need to establish the correct plug-ins to DTCC testing environment. They need to review the timeline and understand the windows to review the tests and implement changes.
- Has DTCC T+1 test approach: Detailed Testing Framework document been reviewed? (link)
- Have the testing scenarios outlined in document been discussed with technology and testing teams?
- Are you ready to submit test transactions during the set testing time windows set by DTCC?
- Is there a plan in place if industry testing is less than successful?
Industry wide testing launches in August and internal testing will enable firms to maximize the opportunities designed in the window. Internal testing is a key precursor, allowing for increased refinement and preparation for the May 2024 T+1 go-live date. Establishing a concrete testing plan, establishing proper testing environments, communicating with vendors, and creating a risk strategy for disruptions will be a key to a successful roll out of this trade settlement change even with compressed timelines. With a plan in place, internal scenario testing will result in proper preparedness for the industry testing that is right around the corner.