With industry activity around the move to T+1 quickly ramping up, DTCC has recently issued two new documents to supplement the T+1 Securities Settlement Industry Implementation Playbook, which will help clients prepare for the transition to an accelerated settlement cycle in 2024.
Related: Reviewing the T+1 Playbook
The first document, Accelerated Settlement (T+1) – DTC, NSCC and ITP Functional Changes, outlines the necessary systems and processing changes required to move to a one-day settlement cycle.
“DTCC recommends that clients, participants, and vendors review the document carefully to determine the impact of these changes on their systems and operational processes,” said Robert Cavallo, Director, Clearance and Settlement, Product Management, DTCC. “The benefit of this document is that it will allow clients to get a jump on their planning and development work, which in turn will lead to better outcomes when testing these changes later this year.”
The second document, T+1 Test Approach, provides a high-level description of how industry testing will be structured, what will be included in the test and who should participate. It should be noted that this document is not a detailed test script, nor is it specific test plans. A more detailed description of how testing will be structured – which will also include the specific test scripts and test scenarios – will be developed by the Industry Testing Sub-Working Group and is anticipated by year-end 2022.
“One of the most critical steps in the move to T+1 will be industrywide testing, so we can all have confidence in our preparations,” said John Abel, Executive Director, Clearance and Settlement, Product Management, DTCC. “It is important for clients to note that T+1 testing will not be mandated, however we strongly recommend that member firms participate in this testing to ensure they are prepared – and there are no surprises.”
DTCC will utilize its existing test environment (PSE U) for T+1 industry testing. This test environment will support all NSCC, DTC and ITP T+1 industry testing requirements. However, given the duration of the T+1 test and the scope of the T+1 changes, DTCC will establish a second T+2 test environment (PSE A), to operate in parallel with the T+1 test environment.
“The industry recognizes that shortening the settlement cycle provides significant benefits for individual investors,” said Abel. “The move to T+1 will not only reduce risk and bring a greater sense of confidence in the safety of the U.S. securities markets, but it will also enable individual investors to have quicker access to capital and securities following a trade execution.”
For more information related to accelerating the U.S. securities settlement cycle to T+1 including documentation, FAQs and more, please visit UST1.org.