A group of financial industry organizations is joining forces to accelerate the U.S. securities settlement cycle from T+2 to T+1.
The collaborating organizations — Investment Company Institute (ICI), The Securities Industry and Financial Markets Association (SIFMA), and The Depository Trust & Clearing Corporation (DTCC) — are outlining key steps to shorten the cycle for secondary market transactions. The groups seek to complete their analysis on the next steps to achieving T+1 by the end of the third quarter. After that, they will develop a time frame for moving to T+1.
“ICI and its members will play an active role in designing the roadmap for shortening the settlement time,” ICI President and CEO Eric Pan said. “Regulated funds occupy a prominent place at the intersection of trading and settlement as they are the primary source for the daily trading transactions that brokers process. ICI, SIFMA, and DTCC led the move to T+2 settlement in 2017, and we look forward to reviving that successful partnership.”
The groups also plan to assess what it may take to further accelerate the settlement cycle beyond T+1.
“Accelerating the settlement cycle, as we and our partners ICI and DTCC know from experience, is a complex and significant undertaking,” SIFMA President and CEO Kenneth Bentsen Jr. said. “A shorter settlement time frame can benefit investors and market participants by reducing credit, market, and liquidity risks and promoting financial stability. Our plan is to fully address the business and operational impacts of the change first, to ensure a smooth transition and avoid any unnecessary market risk.”
ICI, SIFMA, and DTCC led the effort to shorten the US securities settlement cycle to T+2 back in 2017. It was a multi-year effort that required significant coordination across the industry. Similarly, moving to T+1 will be a significant undertaking that will require similar coordination.
“Recent volumes and volatility demonstrate that the time to move to a shorter settlement cycle is now,” DTCC President and CEO Michael Bodson said. “While we are committed to fast-tracking this work and can support T+1 with existing DTCC technology today, we realize that this is a complex undertaking that will require close collaboration across the industry.”
The organizations identified several goals to advance this effort, including mitigating risks to investors and industry participants; analyzing and improving current business and operational processes; minimizing the disruption of important industry services; ensuring new risks are not introduced; and
conducting a comprehensive cost-benefit analysis.