A: DTCC is prepared to move quickly to lead the industry to accelerate the settlement cycle to T+1 and beyond. NSCC and DTC already support T+1 and even some same-day settlement using existing technology, though many market participants do not use this option due to market structure complexities, legacy business and operational processes. Many don’t realize, DTC has always been a T+0 settlement platform ever since its inception in 1973 -- even when the industry settled at T+5, T+3 and now T+2.
As we describe in the paper, in our discussions with the industry, many firms appear ready to start revising their processes to accelerate settlement. They realize it’s in their best interest: shortened settlement times reduce market risk and margin requirements, which would allow firms to use those resources in other ways.
Equity clearing and settlement is part of a much larger ecosystem of linked financial markets. Accelerating the settlement cycle would have upstream and downstream impacts on other parts of the market structure, including derivatives, securities lending, cash borrowing, foreign exchange and collateral processing, and developing a new accelerated settlement system could fundamentally change current market structure. In order to move to T+1, industry participants must align and implement the necessary operational and business changes, and regulators must be engaged.