The US securities industry is finally to move to a two-day settlement cycle (T+2), but not until the end of Q3 2017, some three years after similar shifts in other global markets
The timeline was agreed by a steering committee set up by the DTCC last year, which trawled through input from from more than 600 industry participants across 12 market segments.
Sifma and ICI, co-chairs of the T+2 ISC, have submitted a letter to regulators outlining specific regulatory changes required to support the switchover. Industry-wide testing is slated for Q2 and Q3 of 2017.
Michael Bodson, president and CEO at DTCC, states: “The announcement of this proposed timeline by the T+2 ISC is a critical step forward in shortening the settlement cycle and harmonising the US with other major markets globally. The move to a two-day settlement cycle will strengthen the financial system by reducing risk and creating greater operational efficiencies.”
According to an October 2012 cost-benefit analysis conducted by the Boston Consulting Group (BCG) and commissioned by the 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.
A white paper detailing industry requirements has been released by the T+2 ISC and can be downloaded here:Download the document now 3.1 mb (PDF File)