New report targets 2024 as date to shorten securities settlement cycle

A new report by leading securities industry organizations targets the first half of 2024 to shorten the U.S. securities settlement cycle from trade date plus two days (T+2) to trade date plus one day (T+1).

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The report, Accelerating the U.S. Securities Settlement Cycle to T+1, provides firms with a roadmap for shortening the settlement cycle, which it says will reduce risks and costs for the industry while building upon the benefits achieved in the successful move to T+2 in 2017.

The report – a joint effort by the Securities Industry and Financial Markets Association (SIFMA), the Investment Company Institute (ICI), and The Depository Trust & Clearing Corporation (DTCC) — includes considerations, recommendations, and next steps for moving to T+1.

“Shifting to T+1 will strengthen the financial system and offers tangible benefits to investors by reducing their risk exposure and enabling them to more quickly leverage investment opportunities,” ICI President and CEO Eric Pan said. “Regulated funds are a primary source for daily trading transactions, occupying a prominent place at the intersection of trading and settlement. This report provides a roadmap to help funds and their investors realize the benefits of moving to T+1, and we look forward to working with our members and the SEC on implementing the recommendations.”

Implementing T+1 in the first half of 2024 will allow enough time for firms to assess the changes they need to undertake, the report said. It would also allow time for the industry to conduct comprehensive testing and for regulators to make the necessary regulatory changes.

“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,” SIFMA President and CEO Kenneth Bentsen, Jr., said. “We thank the industry representatives who participated in hundreds of hours of daily, remote working sessions to help us evaluate potential risks, understand the impacts, and develop a sound approach for implementation.”

SIFMA, ICI, and DTCC started discussions around accelerating the settlement cycle in 2020. In April 2021, the industry engaged Deloitte & Touche to lead working group sessions with more than 800 participants from 160 organizations. Also, an Industry Steering Committee was established to oversee the process.

“From our ongoing conversations with market participants and stakeholders, we’re in broad agreement on shortening the settlement cycle to T+1 to deliver significant capital efficiencies and risk mitigation benefits to the entire industry,” DTCC President and CEO Michael Bodson said. “We look forward to continuing to work closely with the industry on this important initiative to modernize market structure, as we did during the move from T+3 to T+2 in 2017, to increase the overall efficiency of the securities markets and remove costs and risks.”