The U.S. T+2 Industry Steering Committee (T+2 ISC), organized by The Depository Trust & Clearing Corporation (DTCC) and co-chaired by the Securities Industry and Financial Markets Association (SIFMA) and the Investment Company Institute (ICI), announced the industry target date of September 5, 2017, for the U.S. move from a T+3 to a T+2 settlement cycle.
The T+2 implementation date was chosen by the T+2 ISC after careful consideration, input from industry participants and consultation with other markets globally. In selecting the date, efforts were made to avoid any known high-volume days, large corporate action days or holidays. The Industry Playbook for achieving a two-day settlement cycle, published in December 2015, provides a detailed timeline, milestones and dependencies that impacted market participants should consider in order to successfully migrate to a two-day settlement cycle in Q3 2017.
In support of the target implementation date, DTCC issued a white paper to clients and the industry titled: “T+2 Test Approach: DTCC’s High-Level Testing Framework.” The paper highlights the processes that will be required for firms moving to a shortened settlement cycle as they prepare for industry-wide testing. The paper also outlines how high-level testing with exchanges, industry infrastructures and utilities, primarily DTCC services — NSCC, DTC and Omgeo — will be structured.
Shortening the U.S. settlement cycle for equities, corporate and municipal bonds, and unit investment trust (UIT) trades from the current three-day settlement cycle, or T+3, to T+2 will reduce operational, systemic and counterparty risk, lower liquidity needs and limit procyclicality, while aligning the U.S. with other T+2 settlement markets across the globe. A shorter settlement cycle will enhance U.S. market structure, improving safety and efficiency for investors.
The target implementation date of September 5, 2017, is contingent upon obtaining regulators’ support in amending applicable rules in a timely manner, and upon the successful completion of industry-wide testing during Q2 and Q3 of 2017.