Shortening the Settlement Cycle

Market resiliency is a top priority for SIFMA and its members. Enhancing our securities settlement process is critical to the continued resiliency of our markets and market operations.

On February 24, 2021, the Depository Trust & Clearing Corporation (DTCC) released a whitepaper, outlining a two-year approach to shortening the settlement cycle for U.S. equities to one business day after the trade is executed (T+1). Similar to 2017, when the industry transitioned to T+2, moving forward on both the integrated settlement model and moving to a T+1 settlement cycle will be a substantial undertaking requiring broad industry actions.

As discussions on the industry’s securities settlement processes continue, including the business and operational impacts on any future changes to shortening settlement times to T+1, SIFMA believes it is essential to ensure that plans allow for a sufficient amount of time to successfully accomplish further changes – particularly in light of other industry operational obligations such as the Consolidated Audit Trail (CAT).

SIFMA, the Investment Company Institute (ICI), and The Depository Trust & Clearing Corporation (DTCC) have collaborated on efforts to accelerate the U.S. securities settlement cycle from T+2 to T+1.  In December 2021, the Industry Working Groups published a report titled “Accelerating the U.S. Securities Settlement Cycle to T+1” targeting the first half of 2024 to shorten the U.S. securities settlement cycle from trade date plus 2 days (T+2) to trade date plus one day (T+1). The move to T+1 requires changes to securities regulations. The Securities and Exchange Commission (SEC) issued a proposal to adopt rules and rule amendments to shorten the standard settlement cycle earlier this year.  In a comment letter on the proposal, SIFMA supported the SEC providing regulatory clarity on SEC Rule 15c6-1, the rule that covers T+1 settlement and outlined recommendations and comments with respect to the proposal which would foster the policy goals of the proposal while reducing potential adverse consequences. SIFMA also noted the proposal reflects many of the recommendations included in the December report. Further to the efforts to shorten the settlement time, SIFMA, ICI and DTCC have recently published “T+1 Securities Settlement Industry Implementation Playbook,” Deloitte & Touche LLP was engaged by SIFMA and ICI to assist in the drafting of this Playbook. The document outlines a detailed approach to identifying the implementation activities, timelines, dependencies, and risk impacts that market participants should consider to prepare for the transition from the current trade date plus 2 days (T+2) settlement cycle to a trade date plus one day (T+1) settlement cycle. The Playbook was developed as a guide for market participants to identify areas impacted by shortening the settlement cycle and considerations that should be addressed.

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