Following the release of a new industry white paper, “Shortening the Settlement Cycle: The Move to T+2,” two commissioners from the U.S. Securities and Exchange Commission (SEC) issued a joint statement in support of the financial industry’s efforts to move to a two-day (T+2) trade settlement cycle for U.S. securities by Q3 2017.
The white paper, issued by the T+2 Industry Steering Committee (T+2 ISC) on June 18, outlines the timeline and activities required to move to a two-day settlement cycle in the U.S. for equities, corporate and municipal bonds, and unit investment trust (UIT) trades.
In their statement, SEC Commissioners Michael S. Piwowar and Kara M. Stein said, “We applaud industry’s leadership in seeking changes to mitigate risks and improve capital efficiency. We look forward to working with our fellow Commissioners and the staff, as well as partnering with market participants to shorten the settlement cycle as soon as possible.”
Shortening the settlement cycle in the U.S. will substantially reduce operational and systemic risk across the industry, lower liquidity needs and limit pro-cyclicality. The shortened settlement cycle will also align the U.S. with other settlement cycles across the globe.
The Depository Trust & Clearing Corporation (DTCC) has been a long-time supporter for the need to implement a T+2 settlement cycle. In October 2014, DTCC, in collaboration with the financial services industry, formed T+2 ISC and an industry working group (IWG) to facilitate the move to a shortened settlement cycle in the U.S.
The T+2 ISC is made up of members from across the securities industry, including the Securities Industry and Financial Markets Association (SIFMA) and the Investment Company Institute (ICI).
“DTCC has been a proud partner in the move to a shorter settlement cycle, and receiving support from the SEC is an important step in making T+2 in the United States a reality,” said Murray Pozmanter, DTCC Managing Director and General Manager, Clearing Services. “We’re thankful to the SEC commissioners for their endorsement of T+2, and look forward to continuing to work with them on this initiative.”