The march to T+1 is on

The U.S. securities industry is planning to reduce the securities settlement cycle by one day as of 2024, and Canada aims to follow suit, says the Canadian Capital Markets Association (CCMA).

The industry group announced plans to shorten Canada’s securities settlement cycle to one day after the trade date (T+1) from the current mark of T+2.

The announcement followed the publication of a report by the U.S. Securities Industry and Financial Markets Association (SIFMA), Investment Company Institute (ICI) and Depository Trust & Clearing Corporation (DTCC), with the target being a move to T+1 by the first half of 2024.

The CCMA said that it’s working with Canadian industry participants as well as coordinating with U.S. industry groups to maintain a common standard for North American markets.

“Keeping the settlement cycles of Canada and the U.S. aligned is a practice supported by economic studies, statements by regulatory policymakers, and the market experience of industry participants,” the CCMA said in a release.

“Not aligning with a T+1 standard would mean Canadian firms would have to undertake systems and procedural changes to manage transactions for two different dates (domestic and cross-border), without achieving the benefits of T+1,” the CCMA added.

The projected benefits of a shift to T+1 include reduced settlement risk and lower collateral costs.

“As we saw during the industry move from T+3 to T+2, shortening the settlement cycle requires a collaborative effort from market participants across the industry, and the development of this report is a key step in making the vision of accelerated settlement a reality,” said SIFMA president and CEO, Kenneth Bentsen, Jr., in a release.

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.