As the U.S. financial industry moves closer to shortening the settlement cycle to “trade date plus two business days” (T+2) later this year, coordinated industry testing has also ramped up in an effort to ensure successful implementation.
Several testing cycles have occurred since testing officially began in February, and will continue through the implementation date of September 5.
“The testing cycles, which occur in bi-weekly segments, have yielded no significant coding issues to date,” said John Abel, DTCC Executive Director, Settlement and Asset Services. “This accomplishment is certainly good news as the industry moves closer to the implementation date.”
Test CUSIPs, Scenarios and Events
With the number of changes being made across business lines to support the move to T+2, comprehensive testing to confirm industry readiness is critical.
Industry Commends SEC on T+2 Final Ruling
DTCC, ICI and SIFMA, on behalf of the T+2 Industry Steering Committee, commend the U.S. Securities and Exchange Commission for finalizing rule changes that facilitate the industry’s transformational effort to achieve T+2. The revised SEC rule establishes a standard settlement timeframe of two days for U.S. equity, corporate and municipal bond, and unit investment trust trades, providing regulatory certainty to promote a coordinated and effective industry transition to T+2 on September 5, 2017.
“We are pleased to see the SEC take important action to align the U.S. settlement cycle with other key markets around the globe, “ said Murray Pozmanter, Head of Clearing Agency Services and Global Operations and Client Services at DTCC. “We commend Acting Chairman Piwowar and Commissioner Stein for their dedication and leadership on this issue. This critical step will ensure that market participants are working towards a common goal, which will ultimately reduce risks and costs for the benefit of the industry.”
To read the press release, please click here.
To provide industry participants with a detailed plan to prepare for testing ahead of time, DTCC published T+2 Test Approach: Detailed Testing Framework in 2016. An updated version, issued in January, included revised language surrounding the Security Master File (SMF) refresh schedule and purging of test transactions in the PSE U environment. In addition, new testing scenarios were added for interoperability with Bloomberg, SS&C and Omgeo as well as “Bank Holiday – Double Settlement Day.”
DTCC also identified certain CUSIPs (“T+2 test CUSIPs”) that members should use in the various test scenarios. In addition to these test CUSIPs, specific Corporate Action test events have also been identified for each test scenario. The CUSIPs that were selected contain the specific parameters needed to test each individual test scenario identified in the testing document.
Calls and Connections
As testing continues, the T+2 Industry Testing Working Group, comprised of over 70 organizations and firms representing both the buy and sell side, has scheduled regular industry calls to discuss testing scenarios and any other aspects of testing that might arise. These calls will continue through August.
To match clients that are seeking test counterparties and/or offering to act as test counterparties for T+2 industry testing, DTCC has also established a T+2 Testing Counterparty Request Form to collect basic information. DTCC will consolidate and regularly update all submitted requests into a password-protected document, which is available on DTCC’s Learning’s T+2 page.
“Our strategy from the beginning as been to approach T+2 testing not as a discreet technology change, but as a complete end-to-end process that covers all affected business and operational functions,” Abel continued. “We are pleased with the positive results in the testing process so far, and we look forward to a continued joint effort among all industry participants.”
Clients should submit any T+2 related questions to DTCC’s T+2 testing mailbox at [email protected].