Across Asia-Pacific, settlement cycles are accelerating in ways that could redefine how markets function. While most regional markets remain on T+2, India has already transitioned to T+1, and China’s cash markets operate at T+0 or T+1, giving it one of the most advanced settlement infrastructures globally.

 

Now, financial hubs like Hong Kong, Singapore, Japan, and South Korea are actively studying their own timelines for shortening cycles. These aspirations have been fuelled by the U.S. and Canada’s recent successful moves to T+1.

 

However, for market participants, this isn’t just operational housekeeping; it’s a fundamental shift in how capital, risk, and compliance are managed across borders.

 

When speed becomes a surveillance challenge

 

As many are now starting to learn, speed comes with a price. Settlement compression reduces the time available for trade matching, funding, and - crucially - surveillance of suspicious activities.

 

Asian asset managers are particularly squeezed: U.S. trades now require processing during narrow pre-market hours, often between 4 am and 7 am Hong Kong time. This leaves little room for reconciling trades or investigating anomalies.

 

In practical terms, this compressed timeline transforms what was once an overnight review process, into a real‑time race to keep up. As a result, compliance teams have fewer opportunities to identify layering, wash trades, or other forms of market abuse before the money moves.

 

The real-time ambition and its risks

 

The long-term vision goes even further. Real‑time (T+0) settlement - already standard for parts of China’s market - has become a central talking point for regulators and infrastructure providers across the region.

 

Integrating real‑time gross settlement (RTGS) systems with securities depositories, often via blockchain pilots, promises lower counterparty risk and capital efficiency. But these benefits come at the cost of oversight windows that effectively disappear.

 

Surveillance teams, accustomed to hours or days for investigations, would instead need to analyse and escalate red flags almost instantly - a daunting challenge for even the most advanced compliance frameworks.

 

Regulatory blind spots emerging

 

Compressed settlement timelines don’t just affect surveillance; they disrupt FX execution, funding strategies, and operational handoffs across global desks.

 

For instance, trade affirmations linked to U.S. markets often coincide with Asia’s morning hours when FX liquidity is thin and volatility can be high. These conditions amplify operational risk while increasing the potential for settlement failures.

 

Regulatory coordination in the region has been uneven; while some jurisdictions are exploring enhanced settlement discipline frameworks, guidance on anti‑money‑laundering and market‑abuse monitoring in a T+1 or T+0 environment remains limited.

 
Importantly, these operational pressures could carry real investment implications - potentially increasing trading spreads, raising hedging costs, and even slowing institutional participation if the percieved risks become too great.

 

A call for technology and policy alignment

 

To meet these challenges, institutions are investing in AI‑driven surveillance, automated trade matching, and follow‑the‑sun operations that keep compliance active around the clock. But technology alone won’t be enough.

 

Regulators in Asia need to engage more directly with industry participants to craft updated guidelines that balance the promise of faster settlement with the non‑negotiable need for robust oversight.

 

Conclusion

 

Asia’s march toward T+1 and the inevitable conversation about real‑time settlement offer efficiency gains but risks creating dangerous blind spots. Without more innovative surveillance tools and harmonised regulation, the speed race could unintentionally weaken the region’s defences against illicit activity.

 

For investors, regulators, and policymakers, the takeaway is clear: if settlement cycles are to accelerate, compliance capabilities must sprint even faster.
 

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