The Depository Trust & Clearing Corporation (DTCC) recommends shortening the U.S. trade settlement cycle for equities, municipal and corporate bonds, and unit investment trusts (UITs) from T+3 (trade date plus three days) to T+2 (trade date plus two days) and will work with the industry to establish an implementation timeline. Once achieved, DTCC recommends a pause and further assessment of industry readiness and appetite for a future move to T+1. After considerable industry input and discussion, along with in-depth due diligence that included risk and cost-benefit studies, DTCC concluded that a move to T+2 would reduce industry risk. DTCC continues to work with market participants, industry organizations and regulators to refine and move this initiative forward.
Shortening the settlement cycle mitigates operational and systemic risk by reducing counterparty exposure, procyclicality and liquidity risk from both a clearing agency and member perspective. It also frees up capital for DTCC member broker-dealers. DTCC’s recommendation is based, in part, on the following feedback from due diligence conducted over the last 18 months that includes: (1) results from risk studies that measure exposure and the National Securities Clearing Corporation’s (NSCC) liquidity need; (2) outcomes of a cost-benefit analysis performed by the Boston Consulting Group (BCG); (3) input from industry associations1 and (4) one-on-one interviews with more than 50 firms across the industry, which helped define behavioral and system changes required to shorten the settlement cycle. In the first half of 2014, expressions of support for a move to T+2, in a timeframe acceptable to the industry, were received from various industry groups, including the Investment Company Institute (ICI), the Association of Global Custodians (AGC), the Association of Institutional INVESTORS (AII) and the Securities Industry and Financial Markets Association (SIFMA).
Download the Position Paper: DTCC Recommends Shortening the U.S. Trade Settlement Cycle