Major players are doing everything they can to have the industry meet a T+1 start date of Sept. 3, 2024
Grygo is the chief content officer for FTF & FTF News.
To say the least, the securities-trading industry has been a little busy since it shifted to a trading day plus two business days settlement (T+2) cycle in 2017.
Yet, despite market volatility, disruptive technologies, epic political and social changes, a pandemic, soaring inflation, and an ongoing war in Europe, the industry-wide drive to an even shorter, T+1 settlement cycle has never really rested on its laurels. It’s also true that financial services firms are used to juggling often competing business initiatives and then having to set all that aside if a crisis emerges.
Which is why heavy hitters in the industry — the Securities Industry and Financial Markets Association (SIFMA), the Investment Company Institute (ICI), and the Depository Trust & Clearing Corp. (DTCC) — have been persistent in pushing T+1 and doing everything they can to have the industry meet a T+1 start date, which is now Tuesday, Sept. 3, 2024. The SEC is in favor of T+1 and is mulling the regulatory changes needed to make it happen.
To get there, SIFMA, the DTCC and ICI, with help from Deloitte & Touche LLP, have just released a free, 176-page guide, “The T+1 Securities Settlement Industry Implementation Playbook,” to take the mystery out of the transition.
The playbook offers details about “the implementation activities, timelines, dependencies, and risk impacts that market participants should consider,” according to the official announcement. “The Playbook consists of 14 sections. Two sections provide overviews of the previous move to a T+2 settlement cycle and the approach for the latest Playbook.”
In addition, there are eight sections that focus on the related trade lifecycle events such as “trade processing, asset servicing, documentation, securities lending, prime brokerage, and funding and liquidity considerations. The remaining sections outline matters related to regulatory changes, global impacts, primary offerings, buy-side considerations, industry testing and migration plans, as well as the associated resources needed for market participants to prepare for the transition to T+1,” officials say.
Overall, the guide is meant to help the industry on track, John Abel, executive director, product management, equity clearance and settlement services at DTCC, tells FTF News.
“The T+1 Implementation Playbook has been provided as an additional tool to help the industry plan for a successful move to T+1. It is intended to identify next steps and the issues that the industry may face as they prepare for the move,” Abel says.
Firms have different infrastructures, businessess, and clients, and “operational processes and geographies that need to be taken into account,” according to officials. “It is important to note that, because the SEC’s proposal to shorten the settlement cycle is not yet final … it may be updated at a later time should regulators select a different transition date.”
Aside from the SEC’s timetable, the industry could be in the grips of a recession during the transition.
John Abel
“One of the primary drivers of the move to T+1 is to reduce margin requirements at DTCC, freeing-up capital for members to use more effectively. This benefit could become even more important should the industry come under increased financial stress,” Abel says.
With the playbook in hand, though, firms have their reasons to commit to the T+1 transition.
“The move to T+1 has a number of broad industry benefits including risk reduction, capital efficiencies, and operational improvements. This, coupled with the fact that T+1 will likely be a regulator-mandated effort, makes it unlikely that firms will resist the acceleration to T+1,” Abel says.
The full playbook can be found here: https://bit.ly/3SLDaf1
Need a Reprint?