Faster Trade Settlement is Here

After much planning, testing and coordination, the U.S. financial services industry has successfully transitioned to a trade date plus two-days settlement cycle for U.S. securities, marking the most significant change to standard market practices in two decades.  This is a significant achievement for U.S. capital markets, where over $300 billion of in-scope securities on average was traded every day in 2016. We appreciate and recognize the efforts the many industry leaders, market participants and regulators exhibited to help make this transition a reality.

Effective September 5, 2017, trades for in-scope securities – including U.S. equity, corporate and municipal bond, and unit investment trust (UIT) trades – now settle two business days following the trade date (T+2) instead of the previous trade date plus three-days cycle. This shorter settlement timeframe provides significant benefits, including reduced market and counterparty risk, increased financial stability and improved safety and efficiency for investors and market participants. It also aligns the U.S. with other major markets globally that use T+2 settlement. Canada, Mexico, Peru and Argentina also completed the switch to T+2 on September 5.

The Depository Trust and Clearing Corporation (DTCC) estimates the lower levels of risk associated with a shorter settlement cycle will reduce the average daily capital requirements for clearing trades through DTCC’s National Securities Clearing Corporation (NSCC) by approximately 25 percent, or $1.36 billion – capital that can be put to better use. The settlement cycle was last changed in 1995 from T+5 to T+3.

The transition to a shorter settlement cycle is the product of a multi-year, broad-based industry effort. The T+2 Industry Steering Committee (T+2 ISC), organized by the Depository Trust & Clearing Corporation (DTCC) and co-chaired by the Investment Company Institute (ICI) and SIFMA, oversaw and advanced the initiative. The T+2 ISC’s working group and sub-groups ultimately involved approximately 600 professionals from all impacted segments of the industry.

This work culminated in a smooth September 1-September 7 transition period, with September 7 serving as a double settlement day when the final T+3 trades and first T+2 trades settled at the DTCC. Broad industry and regulator coordination was never more apparent than it was over this transition period: SIFMA and our partners facilitated over 20 different checkpoint calls through which hundreds of stakeholders connected to ensure a smooth ride to T+2.  For their tireless efforts, we extend our deepest gratitude.

T+2 is now business as usual for U.S. securities markets, which are a key driver of economic growth and job creation in this country.

For more information:

Tom Price is managing director and head of technology, operations and BCP at SIFMA. He is also co-chair of the T+2 Industry Steering Committee (T+2 ISC). The T+2 ISC was organized by DTCC and co-chaired by SIFMA and ICI to guide the move to T+2.