Within a week of European markets moving to a T+2 settlement cycle, the DTCC in the US has formed a steering committee and working group to oversee a similar shift for trades in equities, corporate and municipal bonds, and unit investment trusts (UITs).
The Depository has long campaigned for a reduction in the post-trade lifecycle from the current three-day limit, saying that a T+2 cycle will reduce operational and systemic risk by limiting exposure and creating greater efficiencies in trade processing.
Co-Chaired by Kathleen Joaquin, chief industry operations officer, Investment Company Institute (ICI), and Tom Price, managing director, operations, technology & business continuity planning at Sifma, the Industry Steering Committee (ISC) will be responsible for overseeing the US move to T+2 and will include high-level representatives from buy- and sell-side firms.
The Working Group will be charged with identifying and executing a tactical plan to implement the business and rule changes required for the shift, providing guidance and support to address technological and process building blocks; and communicating changes to the industry.
Says Tom Price. "The formation of the steering committee and working group is key to ensuring that perspectives from across the industry are heard and taken into consideration as these groups move toward determining the best approach and the implementation timeline for reaching a T+2 cycle."
The ISC has set up a dedicated Website, www.UST2.com which will act as an educational hub to keep the industry up-to-speed with developments.
According to an October 2012 cost-benefit analysis conducted by the Boston Consulting Group (BCG) and commissioned by DTCC, moving from a T+3 settlement cycle to a T+2 settlement cycle in the US would initially cost the industry approximately $550 million and result in savings of approximately $195 million annually. This translates into a recovery of investment of between 2.5 and 3.5 years.