The financial services industry has been working toward shortening the standard settlement period from three business days after trade date to two days after the trade date (known as "T+2"). Full implementation of T+2 is currently planned for Sept. 5, 2017.
A key step in making that change is establishment of the necessary regulatory framework. On September 27, the U.S. Securities and Exchange Commission issued a proposed rule that incorporates the required changes to accommodate T+2 settlement of securities transactions. You can read the proposed rule here.
According to SEC Chair Mary Jo White, "Shortening the settlement cycle should yield important benefits that ultimately flow to investors — including reduced clearing capital requirements for broker-dealers, reduced pro-cyclical margin and liquidity demands on market participants, and increased global harmonization of settlement cycles."
Once the comment period for the proposed rule closes on December 5, we expect the SEC to make any necessary revisions and issue final rules in early 2017. Other industry self-regulatory organizations (SROs), such as NYSE, NASDAQ, MSRB, and FINRA, are also in the process of updating their rules..
While the regulatory process continues, transfer agents – including Computershare – and other financial services firms are continuing work on the necessary system to systems and processes within their organizations. Industry-wide testing of T+2 will begin in the early part of 2017.
The biggest impact from T+2 will be on the broker-dealer firms handling the physical settlement of funds. However, Computershare and other transfer agents must also make changes to purchases, sales, dividends and corporate actions within the new T+2 environment, both internally and in interactions with banks, vendors, brokers, issuers, or DTCC. Computershare is well underway in this process, and will be fully prepared to support T+2 when it is implemented.
We look forward to bringing T+2 settlement to fruition – not only to because it will improve investors' experience by shortening the turnaround on their trades, but because it will also reduce risk, provide operational process improvements, lower collateral requirements, and bring the U.S. more in line with international settlement practices.
Additional information on the industry move to a shorten settlement cycle including an executive summary, listing of all regulatory changes, and implementation milestones can be located at the industry website www.ust2.com.