Kristoffer FürstSenior Vice President, Product Management, Arcesium · Limina Founder

Trade order planning for T+1 vs T+2 and mutual fund investing

Name: Trade order planning for T+1 vs T+2 and mutual fund investing
Uploaded: 2025-02-03T06:58:28+00:00
Duration: 1 min 40 s
Channel: Kristoffer Fürst
Description: Kristoffer Fürst explains operational challenges in investment management when a cash deposit is booked today but only becomes free on settlement day…

3 Feb 2025 · 2 min

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1:40

Kristoffer Fürst explains operational challenges in investment management when a cash deposit is booked today but only becomes free on settlement day (T+3). He outlines a workflow using futures to obtain immediate market exposure, then progressively selling portions to fund buys for European (T+1) and American (T+2) stocks, noting the process is time-consuming, error-prone, and demands capable investment management systems.

Chapters

Investment workflows. Start with seeing the future. If you have a deposit coming, you book it today, but it settles in three days. You can't do rebalancing and place buy orders today. Let's say you have a simple equity portfolio with European and American stocks. Those stocks will settle T1 and T2, but you don't have the cash from the deposit until T3 free, potentially. So if you place them today, you're gonna be short cash. Well, you're gonna be negative cash in one or two days. So either you will want to wait to place those orders, but then you don't have the market exposure. The alternative is you might want to place a future on to get at least market exposure today, sell part of it tomorrow for your European stocks, rebalance, create all of the orders, send them to market, etc. Through the investment life cycle and then in two days you do the same, but for the American stocks. So what's going to happen in practice is you're going to put a future on today, tomorrow, sell part of that, buy your European stocks, and then two days from now you're going to sell the rest of the future and buy the US stocks. So there's a lot of, a lot of workflow involved from just one deposit here. And this workflow is complex, it takes time, it's error prone, but needs to be right and it demands a lot from your investment management systems nowadays.