United States of happiness for two-day settlement rule
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.