Research Note: Splunk Addresses Upcoming Banking Regulations For Trade Settlement Cycle With Observability Preparation

By Melody Brue, Will Townsend, Patrick Moorhead - September 13, 2023

New banking regulations often drive changes in financial services institutions (FSIs), and the recent “T+1” rule from the Securities and Exchange Commission1 (SEC) is a significant shift. This rule shortens the trade settlement cycle for broker-dealer transactions from two days to one, effective May 28, 2024. The SEC believes shortening the settlement cycle will reduce credit, market, and liquidity risks arising from unsettled securities trades2. To comply, FSIs must enhance their resilience strategies, update infrastructure, and improve processes. The rule’s impact extends beyond FSIs, affecting consumers and professionals in various roles. Traditional monitoring methods, reliant on physical machines and static data, are insufficient for modern, distributed infrastructures. An observability-based approach is essential, offering real-time insights into trade settlement processes and assets’ security. This regulatory change presents an opportunity for FSIs to modernize their operations proactively and prepare for future efficiency improvements. At a high level, network observability can be instrumental in identifying security gaps and remediating them quickly and easily. This will not be an overnight switch and although the rule does not take effect until May 2024, planning for implementing these changes now will lead to better outcomes.

The shift to a one-day trade settlement cycle necessitates a technological leap to ensure swift issue detection and resolution. In the event of significant outages or technical glitches, human intervention alone is inadequate. Splunk is helping FIs to modernize operations with observability, providing real-time insights into assets, performance, and security3. A consolidated monitoring system, often termed the “single pane of glass,” is crucial to handling this scale efficiently. The company is taking the opportunity from a compliance directive to build resilience, improve processes, and prepare for potential future changes.

The Commission sees the shift to T+1 settlement as a precursor to exploring the possibility of T+0 or instant settlement. They are actively assessing the feasibility of T+0 for the future.


1 www.sec.gov/files/rules/final/2023/34-96930.pdf
2 https://www.sec.gov/news/press-release/2023-29?utm_medium=email&utm_source=govdelivery
3 https://www.splunk.com/en_us/perspectives/rule-change-financial-services.html

Melody Brue
+ posts

Mel Brue is vice president and principal analyst covering modern work and financial services. Mel has more than 25 years of real tech industry experience in marketing, business development, and communications across various disciplines, both in-house and at agencies, with companies ranging from start-ups to global brands. She has built a unique specialty working in technology and highly regulated spaces, such as mobile payments and finance, gaming, automotive, wine and spirits, and mobile content, ensuring initiatives address the needs of customers, employees, lobbyists and legislators, as well as shareholders. 

Will Townsend
+ posts

Will Townsend manages the networking and security practices for Moor Insights & Strategy focused on carrier infrastructure providers, carrier services, enterprise networking and security. He brings over 30 years of technology industry experience in a variety of product, marketing, channel, business development and sales roles to his advisory position.

Patrick Moorhead
+ posts

Patrick founded the firm based on his real-world world technology experiences with the understanding of what he wasn’t getting from analysts and consultants. Ten years later, Patrick is ranked #1 among technology industry analysts in terms of “power” (ARInsights)  in “press citations” (Apollo Research). Moorhead is a contributor at Forbes and frequently appears on CNBC. He is a broad-based analyst covering a wide variety of topics including the cloud, enterprise SaaS, collaboration, client computing, and semiconductors. He has 30 years of experience including 15 years of executive experience at high tech companies (NCR, AT&T, Compaq, now HP, and AMD) leading strategy, product management, product marketing, and corporate marketing, including three industry board appointments.