The financial services industry has been working together on a coordinated, multi-year effort to shorten the U.S. settlement cycle.
Specifically, the settlement cycle will be shortened from three business days after the trade date (“T+3”) to two business days (“T+2”) for most products. This change is expected to take effect on Sept. 5, 2017.
The primary benefit of the shortened settlement cycle will be to reduce risks for individual investors and financial markets as a whole, including credit risk, market risk and liquidity risk – and, as a result, systemic risk. In addition, the shortened settlement cycle will result in reductions in liquidity needs and global harmonization with other T+2 markets.
The T+2 Industry Steering Committee (T+2 ISC) was organized by The Depository Trust & Clearing Corporation (DTCC), the Securities Industry and Financial Markets Association (SIFMA) and the Investment Company Institute (ICI). The Steering Committee has developed a “Standard Language” document for firms to use with their clients.
This document is intended to help firms explain the impact a shortened settlement cycle will have on their end users. It also answers broad questions about the topic of T+2.
“End investors should be aware of the industries move to T+2 and should understand how the move may impact their trading activity and relationships with brokers,” said John Abel, Executive Director, DTCC Settlement Services. “For example, investors will receive payment faster following the sale of a security, but on the flip side, they’ll also be required to provide funds more promptly to their brokers following the purchase of a security.”
To view this new, suggested standardized language document, please visit UST2.com or click here.
T+2 Settlement Conference 2017: Register today for a deep dive into the next phase of the industry's migration to T+2 on March 29