Target date set for automated trade processing

(June 9, 2003) The Canadian Capital Markets Association (CCMA) has announced a two-year plan to implement a fully automated system for institutional securities trading. Under the “straight-through processing” (STP) initiative, all industry players would be required to remove manual trade processing systems, including faxes, phone calls and e-mails, by June 2005.

STP is a component of a wider “best practices and standards” paper, released today by the CCMA. A retail version of the paper will be published later this year.

“We are confident that these best practices and standards will position Canada for future growth, prepare us for STP and ensure the long-term health of the Canadian capital market,” CCMA chair Tom MacMillan said in a conference call this morning.

The U.S. securities industry is going through a similar STP exercise, MacMillan noted, and Canada must follow. “Our two markets are inextricably linked,” he said. “One-quarter of the transactions settled a day at the Canadian depository are cross border and my guess is that this trend will grow in the years ahead.”

Gerry O’Mahoney, chair of TD Waterhouse and a member of the CCMA’s Trade Processing Working Group, admits the STP initiative will be expensive. But he says the costs will be spread out over a period of time, as the industry moves slowly toward its ultimate goal of T+1, or one day settlement of trades.

A deadline to reach T+1 by 2005 was abandoned by the securities industry in the wake of volatile market conditions and the September 11 terror attacks in New York. Industry representatives on both sides of the border said they needed to make STP a reality before evaluating the move to T+1.

The CCMA is requesting comments on the best practices paper by August 15. Final STP implementation details will be published in December, with legislative and regulatory rule changes expected by December 2004.

Filed by Doug Watt, Advisor.ca, dwatt@advisor.ca