The T+2 Industry Steering Committee (T+2 ISC) has welcomed comments by the Securities and Exchange Commission’s (SEC) Chair Mary Jo White supporting a migration to a T+2 settlement cycle in the US.
In a letter to Kenneth Bentsen Jr, president and CEO of the Securities Industry and Financial Markets Association (SIFMA) and Paul Schott Stevens, president and CEO of the Investment Company Institute (ICI), Chair White expressed her support for shortening the US settlement time-frame from T+3 to T+2.
This comes following a paper by the T+2 ISC, advocating the introduction of T+2 by the third quarter of 2017 subject to obtaining regulatory support. SEC commissioners Mike Piwowar and Kara Stein issued a statement of support shortly after the publication of the white paper.
“Obtaining regulatory support for the move to T+2 is critical and we applaud the SEC for their leadership and support in this major initiative to strengthen our financial system,” said Tom Price, co-chair of the ISC, and Managing Director, Operations, Technology & Business Continuity Planning, SIFMA.
The ISC said shortening the settlement cycle would foster greater certainty, safety and soundness in the US capital markets. It said it would reduce counterparty risk as well as pro-cyclical margin and liquidity demand across the industry, and would promote global harmonization in securities settlement cycles. In its letter, the SEC said it recognized these risk-mitigating benefits of the initiative.
“Moving to a shorter settlement cycle will help improve the overall efficiency of securities markets, align the United States with other global markets and promote financial stability,” said Marty Burns, co-chair of the ISC and Chief Industry Operations Officer, ICI.
The migration to T+2 comes as more than two dozen European markets migrated onto T+2 in fall 2014, driven in part by the imminent implementation of the EU’s Central Securities Depository Regulation (CSDR), which will introduce a shortened trade settlement cycle. Australia’s ASX is also hoping to move from T+3 to T+2 for cash equities by March 2016.