While 23 European markets moved to T+2 earlier this month, the US has come one step closer to doing the same.
In order to facilitate the move to a shorter settlement cycle in the US, the Depository Trust and Clearing Corporation (DTCC), in collaboration with the financial services industry, has formed an industry steering committee and an industry working group to lead this effort.
The steering committee is co-chaired by Kathleen Joaquin, chief industry operations officer, Investment Company Institute (ICI), and Tom Price, managing director, operations, technology & business continuity planning, Securities Industry & Financial Markets Association (SIFMA). The committee also comprises of senior-level representatives from across the industry, including both the buy-side and sell-side.
While the committee is tasked with overseeing the US move to T+2 for equities, corporate and municipal bonds, and unit investment trusts, there are no specific plans for when this shorter settlement cycle might be introduced.
“There has not been a project timeline established yet,” said John Abel, vice president, Settlement & Asset Services at DTCC. “The Industry Steering Committee wants to be deliberate and thorough and ensure a proper analysis is conducted before a timeline is proposed. We are organising sub-working groups to analyse various business processes and to determine a set of industry requirements and a proposed timeline.”
The committee is also responsible for driving the deliverables of the Industry Working Group (IWG), which is responsible for identifying and executing a tactical plan to implement the business and rule changes required to move to T+2. IWG is also comprised of members from across the industry.
“Shortening the settlement cycle will foster greater certainty, safety and soundness in the US capital markets by substantially reducing risk across the industry and for the individual investor,” said SIFMA’s Price. “The formation of the steering committee and working group is key to ensuring that perspectives from across the industry are heard and taken into consideration as these groups move toward determining the best approach and the implementation timeline for reaching a T+2 cycle.”
“The voluntary move to a T+2 settlement cycle for securities currently settling at T+3 will result in a meaningful reduction in liquidity and operational risks, will promote better use of capital, and will create significant process efficiencies for market participants—all changes that will benefit investors,” says ICI’s Joaquin.
DTCC has also spearheaded the creation of a new website dedicated to providing information on the move to T+2, including educational information and progress updates by the steering committee and working group.