White Papers

Dec 01, 2012 • White Papers

A Roadmap for Promoting Intraday Settlement Finality in U.S. Markets

Introduction

The Depository Trust Company (DTC), a subsidiary of The Depository Trust & Clearing Corporation (DTCC), is planning on implementing a number of major structural modifications to the U.S. settlement process that will fundamentally alter the way securities transactions in equities, corporate debt and municipal debt securities are settled in the U.S. These proposed changes represent significant enhancements to the settlement process.

DTCC, through its subsidiaries, has helped automate, centralize, standardize and streamline processes critical to the safety and soundness of the capital markets. DTC, the depository, provides clearing and settlement capabilities for the financial services industry, and in 2011 settled transactions worth more than $287 trillion.

This paper provides a high-level overview of key DTC settlement initiatives planned for the next five years. Together, these initiatives will:

  • enhance intraday settlement finality
  • substantially reduce systemic credit and liquidity risk for DTC and participants
  • align DTC with internationally-established best practices
  • promote straight-through processing (STP)
  • encourage institutional trade affirmation
  • improve processing efficiency
  • better position DTC for a shorter settlement cycle, if and when recommended.

DTC continuously monitors and reviews its settlement processes and makes adjustments as needed. However, in light of DTC’s recent efforts to further reduce systemic risk (as outlined in DTCC’s Systemic Risk Paper published in September of 2011) and in light of recently published recommendations for Securities Settlement Systems (SSS) by the Committee on Payment and Settlement Systems (CPSS) of the International Organization of Securities Commissions (IOSCO), DTC has identified a number of significant enhancements to the U.S settlement process that will further improve the safety and soundness of the system for years to come while at the same time aligning its settlement system closer to global standards. These enhancements are multi-year projects and represent DTC’s vision for the future of settlement finality and risk reduction; they will likely require significant planning and development by participants. As such, DTC has created this settlement roadmap that will provide a high-level overview of upcoming system enhancements and provide a proposed implementation timeline for each enhancement. It should be noted that these dates and deliverables are subject to change based on continued input from participants and regulators.

As noted earlier, this paper will discuss enhancements targeted for implementation over the next five years. Some of the enhancements are still being refined. As such, the enhancements will be presented at a high level for context with more detailed descriptions to follow. The objective of the paper is to provide participants with information regarding the strategic future of the U.S. settlement process in DTC and to allow participants to begin projecting development resource requirements accordingly.

Download the White Paper: A Roadmap for Promoting Intraday Settlement Finality in U.S. Markets

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