The current settlement cycle of “trade date plus three business days” (T+3) will be shortened to “trade date plus two business days” (T+2) on Sept. 5, 2017, helping to create a safer, stronger financial system. But now, with just one year before the U.S. financial markets move to this shortened trade settlement cycle, the crucial question on everyone’s mind is: Will firms be ready?
The U.S. T+2 Industry Steering Committee (T+2 ISC), organized by The Depository Trust & Clearing Corporation (DTCC) and co-chaired by the Securities Industry and Financial Markets Association (SIFMA) and the Investment Company Institute (ICI), continues to provide leadership, guidance and logistics support to facilitate the initiative. With the project now moving into the development and testing phase, clients seem to be on-track to meet the industry-determined implementation date.
“The move to T+2, which will impact a wide variety of U.S. securities and financial instruments, is one of the largest industry-driven initiatives ever undertaken by the U.S. financial services industry,” said Marty Burns, Chief Industry Operations Officer, Investment Company Institute (ICI). “It has required coordination with almost every market participant, across almost every market segment.”
“Moving to T+2 will produce a number of benefits, including reductions in contra-party risk, reductions in liquidity needs and harmonization with other markets globally,” said Tom Price, Managing Director, Technology, Operations, and Business Continuity group, SIFMA. “It is these benefits that prompted the industry to move to T+2.”
The number of changes being made to support the move to T+2 – and the magnitude of the changes – also highlights the need for comprehensive and well-coordinated industry testing and implementation plan to confirm readiness and ensure a successful implementation. To meet the targeted migration date, the industry will need to complete internal system changes and process and procedure impact analysis by Q3 of this year, while preparing for the testing phase that follows.
To ensure successful implementation, the T+2 ISC has also developed a “T+2 Command Center” to monitor industry readiness and coordinate implementation tasks.
“With the implementation of T+2 now less than a year away, industry-wide planning, development and testing become that much more important,” said John Abel, DTCC Executive Director, Settlement and Asset Servicing. “We’re confident that with the continued participation from the industry and market participants, we will successfully meet the September 2017 deadline.”
DTCC published its “T+2 Test Approach: Detailed Testing Framework” on August 1, 2016. The purpose of the document is to provide DTCC clients with a detailed plan for testing T+2 changes with DTCC and other industry infrastructures. The paper includes information on the structure of the T+2 industry test, connectivity to DTCC’s T+2 and T+3 test environments, and suggested test scenarios that clients can use to begin preparing their own T+2 test plans.
In December 2015, the ISC developed the “T+2 Industry Implementation Playbook,” which provided a timeline with milestones and dependencies, as well as detailed remedial activities that impacted market participants should consider in preparation for migration to the T+2 settlement cycle.
The T+2 ISC has launched a FAQ page and invites the industry to submit questions and review periodic updates.
For additional information on the T+2 Project, including white papers, documents and press announcements, please visit UST2.com.