The T+1 Securities Settlement Industry Implementation Playbook was published this week by the Securities Industry and Financial Markets Association (SIFMA), the Investment Company Institute (ICI), and The Depository Trust & Clearing Corporation (DTCC).
The playbook outlines an approach to identifying the implementation activities, timelines, dependencies, and risk impacts that market participants should consider preparing for the transition from the current trade date plus two days (T+2) settlement cycle to a trade date plus one day (T+1) settlement cycle.
“As part of ongoing efforts to decrease risk in the system, SIFMA, ICI, and DTCC started discussions in 2020 and formally initiated the effort to accelerate the settlement cycle to T+1 in early 2021,” SIFMA President and CEO Kenneth Bentsen, Jr. said. “This February, we welcomed the SEC’s leadership in supporting the acceleration of the settlement cycle to T+1 via its proposal, which provides regulatory certainty to market participants.”
It should be noted that the SEC’s proposal to shorten the settlement cycle is not yet final, so the playbook serves as a guide to assist with the many complex steps involved in the move to T+1. The playbook assumes a third quarter 2024 transition date to a T+1 settlement cycle, subject to final regulatory approval. It is a complex ecosystem that requires full industry participation with the support of regulators, working together to make an efficient, effective, and risk-free transition to a T+1 settlement cycle.
“ICI is pleased to coordinate with DTCC, SIFMA, and the SEC on the industry-wide effort to shorten the settlement cycle to T+1,” ICI President and CEO Eric Pan said. “Moving to T+1 will provide increased efficiencies for both investors and market participants and reduce settlement risk. The Playbook released today will be a helpful roadmap for our industry, building on the success of the move to T+2.”
The playbook consists of 14 sections, with two sections providing overviews of the previous move to a T+2 settlement cycle and the approach for the latest playbook. Further, eight sections explore specific areas of the trade lifecycle, including trade processing, asset servicing, documentation, securities lending, prime brokerage, and funding and liquidity considerations. The remaining sections outline matters related to regulatory changes, global impacts, primary offerings, buy-side considerations, industry testing, migration plans, and the resources needed to prepare for the transition to T+1.
“The playbook provides a robust strategy and plan for market participants to follow to prepare for the move to T+1,” Michael Bodson, president and CEO at DTCC, said. “The playbook reflects the experiences and lessons learned during the seamless transition from T+3 to T+2 in 2017, and we are confident it provides a clear and defined roadmap to further accelerate the settlement cycle in the most efficient manner possible while mitigating risk.”
Deloitte & Touche LLP was engaged by SIFMA and ICI to assist in drafting this playbook.