The implementation of T+1 is not a current priority for U.S. financial institutions, and is unlikely to become one in the foreseeable future according to a new report from research firm TowerGroup.

The firm says that many senior financial executives have yet to be convinced that the risks of not implementing T+1 outweigh the costs and risks of pursuing it. “With institutions firmly focused on return on investment and skeptical of industry-wide initiatives, T+1 will be a success only if driven by business necessity and a general acceptance that the risks of the current settlement cycle are real,” it says.

The report notes that spending on T+1 is collectively estimated at US$6.49 billion, with investment managers paying US$1.12 billion and broker/dealers spending US$5.37 billion.

It says the U.S. has one of the best settlement infrastructures that already eliminate principal risk between market participants and provide adequate remedy against non-performing counterparties.

The report also says that T+1 preparation will require firms to re-engineer their back-office systems, which may represent significant technology risk.

It concludes that the risk and benefits surrounding a shorter settlement cycle are not compelling enough to force the SEC to mandate T+1 and are particularly weak for the buy-side and the individual investor.

“We don’t believe that the industry will green-light T+1 given the magnitude of the technology changes and technology risk factors, versus the soft benefit quantification from reducing the settlement period. These overlying concerns will become the focus of the industry when considering the immediate value of T+1,” says Tim Lind, TowerGroup senior analyst and co-author. “The only wild card in this analysis is the SEC, whose role will be a vital factor in determining if the industry will embrace T+1. While, we believe the SEC will not mandate this project, it is difficult to tell how they will eventually react.”