Securities industry gears up for shift to T+1

Ahead of a planned move to shorten the securities settlement cycle in 2024, several U.S. industry groups launched an implementation plan to guide the transition from trade date plus two days (T+2) settlement to T+1.

The U.S. Securities Industry and Financial Markets Association (SIFMA), the U.S. Investment Company Institute (ICI), and the Depository Trust & Clearing Corporation (DTCC) published a playbook outlining the implementation activities, deadlines and risks that financial firms should consider ahead of the change.

The playbook covers areas such as trade processing, asset servicing, documentation, securities lending, prime brokerage, funding and liquidity considerations. It also considers regulatory issues, possible global impacts, and effects on the buy-side, along with industry testing and migration plans.

“We are pleased to offer all impacted market participants a guide to follow as they develop their implementation plans for moving to T+1 settlement in 2024,” said Kenneth Bentsen, Jr., president and CEO of SIFMA, in a release.

The industry groups said the implementation playbook was developed to help firms identify areas that will be impacted by shortening the settlement cycle, and operational issues that will likely have to be addressed as a result.

“The playbook assumes a third quarter 2024 transition date to a T+1 settlement cycle, subject to final regulatory approval, and it may be updated at a later time should regulators select a different transition date,” the groups noted.

The Canadian securities industry is currently planning to make the transition on the same timeline as the U.S.

However, a recent survey of the Canadian industry by the Canadian Capital Markets Association (CCMA) found that two-thirds of respondents believe the shift from T+2 to T+1 will be more complicated than the move from T+3 to T+2.

The survey found that just over half (56%) of respondents said their company has a T+1 project manager or a T+1 team (53%). Less than half (43%) said they have a “high-level” T+1 project plan, and only about one-quarter (26%) have a T+1 budget for this year, it said.

“We suspect these lower numbers are due at least partly to the U.S. Securities and Exchange Commission (SEC) not yet having set a T+1 ‘compliance date’ — and it may not for some time,” the CCMA noted in a bulletin.

While the SEC has proposed undertaking the move by the end of the first quarter in 2024, the U.S. industry groups and the CCMA are advocating to make the move over the Labour Day weekend in the third quarter.

“Once a date is set, we’re comfortable survey measurements will rise dramatically,” the CCMA said.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.