The Securities Industry Association has delayed the move to next-day settlement processing (T+1) by a year, from June 2004 to June 2005. The postponement will give securities firms more time to address business continuity issues posed by the 11 September terrorist attacks on the US.
“The industry remains committed to straight-through processing leading to T+1,” says Donald Kittell, SIA executive vice president. “STP and T+1 will provide the industry with greater capacity to clear and settle far more transactions with even more precise accuracy and greater speed than what can be done today. The less aggressive pace will enable firms to complete the substantial systems development required for STP while continuing with other critical technology projects.”
Kittell also notes that the industry’s experience in September reinforces the need for more extensive STP and the reduction of manual processing of trade information and physical movement of cheque payments and securities.
The new target date means that securities firms must be ready by mid-2004 so that they can participate in a full year of utilising the new processing infrastructure and industry testing as envisioned in the original plan.
Securities now clear and settle three business days after the transaction. Under T+1 (trade date plus one day), trades would clear and settle on the next business day. The September 11 terrorist attacks not only exposed the risks associated with a three-day trade settlement cycle, but also highlighted the pressing requirement for more automatation in back office settlement and payment processing.