T + 2 Settlement Cycle White Paper Released

The T+2 Industry Steering Committee (T + 2 ISC) has released a white paper outlining the timeline and activities required to move to a two-day settlement cycle (T+2) in the U.S. by the end of Q3 2017. The T+2 ISC, organized by The Depository Trust & Clearing Corporation (DTTC) and made up of members from across the securities industry, including 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.

The proposed implementation timeline was recommended by the T+2 ISC after thorough input from more than 600 industry participants across 12 market segments. The move to T+2 in the U.S. is contingent upon obtaining regulators’ support to amend applicable rules in a timely manner, and upon successfully completing industry-wide testing during Q2 and Q3 2017. SIFMA and ICI, co-chairs of the T+2 ISC, have recently  submitted a letter to regulators outlining specific regulatory changes needed to facilitate the move to T+2.