NEW YORKLONDON, March 21 Reuters The looming introduction of a shorter settlement cycle for U.S. securities is causing headaches for international fund managers, who face staffing problems, the prospect of holding more cash and raised foreign exchange risk as they prepare to comply.

Introduced to lessen the risks of unsettled trades after periods of volatility, the coming change will see securities transactions settle one business day after the trade, or T1, rather than two.

The move, which came after the 2021 plunge in GameStop, is due to take place on May 28 in the U.S.

However, it places the country at odds with much of the rest of the world where the typical cycle is T2. As a result, market participants have been rethinking their processes to avoid transaction failures and higher trading expenses, according to custodians, traders and consultants.

The transition is not going to be without its costs, said Ben Springett, head of European electronic and program trading at Jefferies.

You39;d … expect there to be a requirement for a greater amount of cash balances in funds to bridge any potential gaps, and cash mismatches, said Springett. So, that will come at a detriment to fund performance.

The Depository Trust Clearing Corporation DTCC, which provides securities clearing and settlement in U.S. financial markets, has been working to prepare with industry bodies including the Investment Company Institute ICI.

Tom Price, managing director and head of technology,…