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Financial Services Industry Applauds Sec Action to Facilitate a Shorter Settlement Cycle

A two-day settlement cycle will yield numerous benefits for investors, industry, regulators and all market participants

The T+2 Industry Steering Committee (T+2 ISC) applauds recent action by the Securities and Exchange Commission (SEC) to propose a rule change that will facilitate the move to a two-day settlement cycle. The proposed rule change will provide regulatory certainty necessary to help the financial services industry achieve its goal of moving to a two-day settlement cycle by September 2017.

The T+2 ISC, organized by The Depository Trust & Clearing Corporation (DTCC) and made up of members from across the securities industry, including co-chairs the Securities Industry and Financial Markets Association (SIFMA) and the Investment Company Institute (ICI), was formed to provide oversight and guidance on the U.S. move to a shorter settlement cycle.

Shortening the U.S. settlement cycle for equities, corporate and municipal bonds, and unit investment trust (UIT) trades from the current three-day settlement cycle, or T+3, to T+2 will provide a number of benefits, including reducing operational, systemic and counterparty risk, lowering liquidity needs, and limiting procyclicality, while aligning the U.S. with other T+2 settlement markets across the globe. A shorter settlement cycle will enhance U.S. market structure, improving safety and efficiency for investors.

“We applaud the SEC’s proposal to move to T+2, bringing the U.S. market one step closer to realizing a T+2 settlement cycle,” stated John Abel, Executive Director, at DTCC. “Market participants should continue to plan their operational readiness to support this move, ensuring adequate time for testing.”

“Today’s proposal represents a critical milestone that will keep the T+2 project moving along toward implementation next year,” said Marty Burns, Chief Industry Operations Officer at ICI. “Indeed, this proposal begins an important process that enables other regulators to align their rules with those of the SEC to provide a clear framework for the remaining steps to implement T+2.”

“We commend the SEC for taking proactive measures to facilitate a two-day settlement cycle by September 2017. This is a fundamental change to U.S. market structure, and the success of this effort relies on robust communications, planning, execution and collaboration between the industry and regulators,” stated Tom Price, co-chair of the T+2 ISC, and Managing Director, Operations, Technology & Business Continuity Planning, SIFMA. “The move to T+2 will help mitigate operational and counterparty risk and keep the U.S. competitive with global markets – a win for investors, the industry and all market participants.”