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The Depository Trust & Clearing Corporation (DTCC), ICI and SIFMA, on behalf of the T+2 Industry Steering Committee (T+2 ISC), commend the U.S. Securities and Exchange Commission (SEC) for finalizing rule changes that facilitate the industry’s transformational effort to achieve a two-day settlement cycle (T+2). The revised SEC rule establishes a standard settlement timeframe of two days for U.S. equity, corporate and municipal bond, and unit investment trust (UIT) trades, providing regulatory certainty to promote a coordinated and effective industry transition to T+2 on September 5, 2017.
Shortening the time it takes to settle trades from the current three-day cycle, known as T+3, to T+2 will provide significant benefits to investors and market participants. A shorter settlement timeframe will reduce credit, market and liquidity risks, promote financial stability, and align the U.S. with other T+2 settlement markets across the globe.
Shortening the settlement cycle is also consistent with the SEC’s focus on enhancing the resilience and efficiency of the national clearance and settlement system. Given the lower levels of risk associated with a shorter settlement cycle, DTCC estimates the move will reduce the average daily capital requirements for clearing trades through DTCC's National Securities Clearing Corporation (NSCC) by 25 percent, or $1.36 billion. A shorter settlement cycle will further enhance U.S. market structure, improving safety and efficiency for investors.
Murray Pozmanter, Head of Clearing Agency Services and Global Operations and Client Services at DTCC, stated, “We are pleased to see the SEC take important action to align the U.S. settlement cycle with other key markets around the globe. We commend Acting Chairman Piwowar and Commissioner Stein for their dedication and leadership on this issue. This critical step will ensure that market participants are working towards a common goal, which will ultimately reduce risks and costs for the benefit of the industry.”
“The SEC’s final rule represents a win for investors and our financial markets,” said Paul Schott Stevens, president and CEO of ICI. “A shorter settlement cycle will directly and tangibly reduce risks within U.S. capital markets, while better aligning our markets with those of other jurisdictions.”
“Shortening the time to trade settlement may sound simple, but in fact is a transformational effort to enhance the investor experience, reduce risk, and keep the U.S. competitive with global markets,” said Kenneth E. Bentsen, Jr., SIFMA president and CEO. “The SEC’s action marks a critical milestone and the last major hurdle in the T+2 effort. Moving forward, robust planning and coordination among the industry and regulators will be essential to meet the T+2 target date of September 5, 2017.”
