05 September 2017
New York
Reporter: Drew Nicol

North America slims down to T+2


North American securities markets are today officially shortening their settlement cycle to T+2 from a T+3 cycle.

Affected securities include equities and corporate and municipal bonds, and unit investment trust (UIT) trades in the US, Canada and Mexico, Peru and Argentina.

The transition aims to reducing operational and systemic risks by forcing securities through the market infrastructure quicker, thereby allowing counterparties to avoid trade failures.

The shorter settlement timeframe also aligns these markets with the EU, which moved to a T+2 settlement cycle in 2014.

More than $300 billion of in-scope securities was traded on average every day in 2016.

In a joint statement on the transition, the Depository Trust & Clearing Corporation (DTCC), the Securities Industry Financial Markets Association (SIFMA) and Investment Company Institute (ICI), which were founding members and co-chairs of the T+2 Industry Steering Committee (T+2 ISC), said the move will “provide significant benefits, including reduced market and counterparty risk, increased financial stability and improved safety and efficiency for investors and market participants”.

DTCC also estimated the lower levels of risk associated with a shorter settlement cycle will reduce the average daily capital requirements for clearing trades through DTCC's National Securities Clearing Corporation (NSCC) by approximately 25 percent, or $1.36 billion.

Murray Pozmanter, head of clearing agency services and global operations and client services at DTCC said: “The US move to a T+2 settlement cycle marks the most significant change to the market’s settlement cycle in over 20 years.”

“A collaborative industry-driven effort with strong support from regulators, the T+2 initiative has achieved its common goal, which will ultimately further reduce risks and costs for the benefit of the investors and market participants.”

The settlement cycle was last changed in 1995 from T+5 to T+3.

Marty Burns, chief industry operations officer at ICI, and co-chair of the T+2 ISC, added: “Foresight, leadership, and collaboration in the financial industry have resulted in the transformational move to T+2.”

“Market participants are pleased with the strong support of regulators in achieving this goal, but it is worth noting that the industry initiative toward a shorter settlement cycle took root and progressed without regulatory mandates."

"Without question, the most significant value of T+2 is its effect of reducing settlement risks and enhancing market resiliency for stakeholders and, most importantly, investors.”

More news
The latest news from Securities Lending Times
Join Our Newsletter

Sign up today and never
miss the latest news or an issue again

Subscribe now
NEX Regulatory Reporting made trade repository under EMIR
24 November 2017 | London | Reporter: Jenna Lomax
The trade repository, which will be based in Stockholm, Sweden, will prepare NEX for its trade operations post Brexit
Al Ramz Capital gains short selling licence
24 November 2017 | Abu Dhabi | Reporter: Jenna Lomax
Al Ramz Capital is one of the first investment providers to offer short-selling in the UAE
BNP Paribas bolsters its senior agency lending roster
24 November 2017 | London | Reporter: Drew Nicol
Adnan Hussain moved from RBC to take up a role as global head of agency lending and head of market and financing services in the UK for BNP Paribas
Hedge funds continue 2017 run
23 November 2017 | Madrid | Reporter: Drew Nicol
Global AUM of hedge funds rose 24 percent to $3.2 trillion in the past two years, according to data captured by IOSCO’s latest market survey.
Goldman Sachs appointed by Thrivent for agent lending
23 November 2018 | Minneapolis | Reporter: Jenna Lomax
Thrivent Financial has appointed Goldman Sachs as it new lending agent
ICMA maps repo and cash bond operations
22 November 2017 | Zurich | Reporter: Zsuzsa Szabo
ICMA has launched a free-to-read mapping directory for more than 80 technology solutions for repo and cash bond operations
FCA publishes MiFID II guide
22 November 2017 | London | Reporter: Jenna Lomax
The guide focuses on the regulatory regime in MiFID II for trading venues and data reporting services providers