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Treasury & Capital Markets
Financial markets prepare for T+1
Playbook identifies implementation activities and risks associated with accelerated settlement cycle
The Asset 3 Aug 2022

Three financial industry groups have published a guide for market participants to prepare for the transition to the T+1 (trade date plus one day) settlement cycle.

The Securities Industry and Financial Markets Association (SIFMA), the Investment Company Institute (ICI), and The Depository Trust & Clearing Corporation (DTCC) has come up with the T+1 Securities Settlement Industry Implementation Playbook, which outlines a detailed approach to identifying the implementation activities, timelines, dependencies, and risk impacts in the transition from the current T+2 settlement cycle. Deloitte & Touche was engaged by SIFMA and ICI to assist in the drafting of the playbook.

The playbook identifies areas impacted by shortening the settlement cycle and considerations that should be addressed, while aware that every firm has different infrastructure, businesses, and clients, as well as operational processes and geographies that need to be taken into account.

Since the proposal of the US Securities and Exchange Commission (SEC) to shorten the settlement cycle is not yet final, the playbook serves only as a guide with the many complex steps involved in the move to T+1. It assumes a third quarter 2024 transition date to T+1, subject to final regulatory approval, and so it may be updated at a later time should regulators select a different transition date.

In 2017 SIFMA, ICI, and DTCC partnered to lead the effort to shorten the US securities settlement cycle to T+2, which required significant coordination across the industry and spanned multiple operations, functions and regulations.

“As part of ongoing efforts to decrease risk in the system, SIFMA, ICI, and DTCC started discussions in 2020 and formally initiated the effort to accelerate the settlement cycle to T+1 in early 2021,” says SIFMA president and chief executive officer Kenneth E. Bentsen, Jr. “This February, we welcomed the SEC’s leadership in supporting the acceleration of the settlement cycle to T+1 via its proposal, which provides regulatory certainty to market participants. Today we are pleased to offer all impacted market participants a guide to follow as they develop their implementation plans for moving to T+1 settlement in 2024.”

The playbook consists of 14 sections. Two sections provide overviews of the previous move to a T+2 settlement cycle and the approach for the latest Playbook. Eight sections explore specific areas of the trade lifecycle including trade processing, asset servicing, documentation, securities lending, prime brokerage, and funding and liquidity considerations.

The remaining sections outline matters related to regulatory changes, global impacts, primary offerings, buyside considerations, industry testing and migration plans, as well as the associated resources needed for market participants to prepare for the transition to T+1.

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