Sifma is calling for the US capital markets industry to move to a T+2 settlement lifecylce, as other markets worldwide bid to bridge the gap between trade execution and delivery of financial contracts.
The Depository Trust and Clearing Corporation is leading the cheerleading to shorten settlements for equities, corporate and municipal bonds, and unit investment trusts to no longer than T+2, following the publication of a study in 2012 outlining the costs and benefits of such a move. European markets are moving to T+2 for these securities, and much of Asia is already on a T+2 settlement cycle.
Sifma's support for the initiative follows a rallying cry from the Investment Company Institute in February which said that a move to T+2 would be a positive step toward sounder markets and would align the US with initiatives in global markets.
Kenneth Bentsen, Jr., Sifma president and CEO, says: "Sifma looks forward to working with all market participants to ensure a smooth implementation that is carefully executed so as not to unintentionally disrupt operations or negatively impact investors."
He acknowledges that shortening the settlement cycle is a fundamental change to existing market practices that must be implemented with great care to avoid any operational disruptions.
Sifma recommends that the industry, DTCC and regulators continue to work together to accomplish key "building blocks" that together over time will ensure a smooth transition to T+2. The building blocks include compression of timeframes for clearing and settling, specific regulatory rule changes, changes to the trade affirmation process, and other systems and process changes.