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The T+2 Industry Steering Committee (T+2 ISC) today published an Implementation Playbookdeveloped with Deloitte Advisory. The Playbook provides a detailed timeline, milestones and dependencies that impacted market participants should consider in order to migrate to a two-day settlement cycle (T+2) from the current three-day settlement cycle for U.S. equities, corporate and municipal bonds, and unit investment trust (UIT) trades by the end of Q3 2017.
Shortening the U.S. settlement cycle will provide a number of benefits, including reducing operational, systemic and counterparty risk and lowering liquidity needs, while aligning the U.S. with other T+2 settlement markets across the globe. A shorter settlement cycle will enhance U.S. market structure by improving safety and efficiency for investors.
The Playbook was developed in response to a request by Securities and Exchange Commission (SEC) Chair Mary Jo White for a more detailed implementation plan after the Securities Industry and Financial Markets Association (SIFMA) and the Investment Company Institute (ICI), co-chairs of the T+2 ISC, submitted a June 18, 2015, letter to Chair White requesting specific regulatory changes to facilitate the move to a shortened settlement cycle. Chair White responded to the industry’s comments with a September 16, 2015, letter that noted her support of the T+2 ISC’s efforts to shorten the settlement cycle and requested more information on the implementation plan. The Playbook was submitted to the SEC on December 18, 2015.
The T+2 ISC engaged with the T+2 Industry Working Group, Deloitte Advisory and a broad group of market participants to develop this Playbook. The Playbook builds upon the white paper that was published by the T+2 ISC on June 18, 2015, which outlined the high-level industry requirements and a high-level timeline for shortening the settlement cycle. The proposed T+2 implementation timeline was developed after thorough input from more than 600 industry participants across 12 market segments.
“Moving to a two-day settlement is a transformational change for the securities industry, which will also yield long-term benefits and help reduce risk for investors,” said Bob Walley, principal, Deloitte & Touche LLP, in the finance and operations practice, who spearheaded the development of the Playbook for Deloitte Advisory. “We are proud to work with the Industry Steering Committee and the industry working group in a collaborative effort to develop this playbook. The Playbook providesindustry participants with a comprehensive document to help prepare for a two-day settlement period. We look forward to continuing to help the industry best serve the public interest with this historic initiative.”
“The industry’s work with Deloitte Advisory to develop an Implementation Playbook is a critical next step to help ensure that all market participants have the tools and knowledge they need to prepare their individual firms to be T+2 ready,” said Tom Price, co-chair of the T+2 ISC and Managing Director of the Technology, Operations and Business Continuity Group, SIFMA. “Active engagement from all market participants and regulators is essential to keep this process moving forward. We are committed to working as a broad industry coalition to make the T+2 settlement cycle a reality.”
“The level of participation by industry stakeholders is a testament to the commitment from all corners of the financial services sector to achieving a shortened settlement,” said Marty Burns, ISC Co-Chair and Chief Industry Operations Officer, ICI. “Representatives of the buy-side, sell-side and service providers all have contributed significant time and energies in working with Deloitte Advisory to complete the playbook, which is the guide forward for reaching a T+2 cycle. The playbook is an important milestone that will enable us to achieve a shortened cycle benefitting industry participants and, most importantly, investors.”
“The release of the Implementation Playbook is an important step as the U.S. moves closer to a T+2 cycle. I commend the T+2 ISC for continuing to advance this industry wide initiative,” said Michael Bodson, President and CEO at DTCC. “Industry participants now have the key information needed as we work towards our ultimate goal of moving to a two-day settlement cycle.”
The Playbook provides guidance on issues such as trade processing, asset servicing, documentation, regulatory changes, testing/migration, industry actions and other considerations for achieving a T+2 settlement cycle. The Playbook also includes implementation timelines that provide a suggested guideline for regulatory actions, industry actions, market participant implementation, industry testing, and migration milestones and dependencies identified by the industry.
The move to T+2 in the U.S. is contingent upon obtaining regulators’ support in amending applicable rules in a timely manner, and upon the successful completion of industry-wide testing during Q2 and Q3 of 2017.
