DTCC Connection

May 14, 2015 • DTCC Connection

SIFMA Ops 2015 – Shortened Settlement Cycle: The Path Forward

By Michael Battaglini

John Abel, DTCC Vice President, Settlement Services
John Abel, DTCC Vice President, Settlement Services

John Abel, DTCC Vice President, Settlement Services, served on the panel of experts for the SIFMA Ops 2015 “Shortened Settlement Cycle: The Path Forward” session where the key drivers and building blocks of a shorter settlement cycle were the focus of the discussion.

Joining Abel on the panel was Graeme McEvoy, Managing Director & Global Head, ISG Product Operations, Morgan Stanley, Louis J. Rosato, III, Director, Investment Operations Group, Blackrock and Jeanmarie Davis, Senior Vice President & Head of Financial Market Infrastructure, Federal Reserve Bank of New York.

 

 

 

 




DC:      This is very much an industry-driven collaboration. How has the industry, which often has different viewpoints and priorities, managed to agree to support a move to T+2?   

JA:       It was only after considerable input and discussion — along with in-depth due diligence that included risk and cost-benefit studies — that the industry concluded that a move to T+2 would reduce industry risk. Late in 2014, DTCC helped form an industry steering committee (ISC) and an industry working group (IWG) to unify the effort ,to identify the industry level changes needed to move the U.S. market to T+2 and to develop a proposed implementation timeline.  The industry also created a website (www.ust2.com) to keep everyone updated and informed about the T+2 project and timelines.

DC:      What viewpoint does the Federal Reserve Bank of New York (FRBNY) have on the T+2 project?

JA:       The Federal Reserve Bank of New York is supportive of a move to shorten the U.S. settlement cycle. However, they have taken a “hands-off” approach to this initiative believing it is better to allow the industry to take the lead and determine the implementation timeline.

DC:      What is the timeframe in moving to T+2 settlement and how will this impact different market segments?

JA:       The exact timeline is still being discussed and hard dates have not yet been put in place.  The latest target date is to move to T+2 in the 3rd quarter of 2017. This target date is subject to certain critical success factors, most notably, better certainty around the legal and regulatory changes and the development of an industry-wide test approach.

As for the different market segments, it’s hard to say how each will be impacted at this stage.  We have identified “industry-level requirements” for the move to T+2.  Each firm will need to review these requirements and determine the impact the requirements will have on their organization, as well as the work that needs to be done to move to T+2. Although the number of industry-level requirements identified is relatively small, each requirement has the ability to generate multiple changes within an individual organization depending on the organization’s business mix and level of automation. 

More details around the proposed T+2 timeline and the T+2 industry-level requirements will be contained in an industry paper scheduled to be released in early June 2015.

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