That’s settled then, everyone’s happy

That’s settled then, everyone’s happy

The US Securities and Exchange Commission (SEC) is being vigorously back slapped and group hugged by the finserv industry for finalising rule changes to help achieve a two-day settlement cycle (T+2).

With an avalanche of acronyms, the Depository Trust & Clearing Corporation (DTCC), Investment Company Institute (ICI) and Securities Industry and Financial Markets Association (SIFMA), on behalf of the T+2 Industry Steering Committee (T+2 ISC), have all commended SEC for this latest development.

Murray Pozmanter, head of clearing agency services and global operations and client services at DTCC, says: “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.”

According to the happy bunnies, the revised SEC rule establishes a standard settlement timeframe of two days for US equity, corporate and municipal bond, and unit investment trust (UIT) trades, providing regulatory certainty to promote a co-ordinated and effective industry transition to T+2 on 5 September 2017.

Shortening the time it takes to settle trades from the current three-day cycle, known as T+3, to T+2 will “provide significant benefits to investors and market participants”. The cheerful contingent adds that a shorter settlement timeframe will reduce credit, market and liquidity risks, promote financial stability, and align the US with other T+2 settlement markets across the globe.

Deliriously delighted DTCC estimates the move will reduce the average daily capital requirements for clearing trades through its National Securities Clearing Corporation (NSCC) by 25%, or $1.36 billion.