DTCC – the United States CSD – is continuing its industry collaboration to shorten its US securities settlement cycle from today’s T+2 framework to T+1. This time, the Securities Industry and Financial Markets Association (SIFMA) and the Investment Company Institute (ICI) are on board with the work. (And consultancy SIONIC chips in a go-for-it from the sideline.)
This questions-and-answers article, published Tuesday, sees the heads of the three organizations line out the reasons they see behind their recently announced collaboration.
“Currently, U.S. equities and other products have a standard two-day settlement cycle (T+2), which was a key milestone achieved in September 2017 when the industry moved from T+3 to T+2. The industry is now planning to shorten the settlement cycle even further to one business day after execution (T+1),” they state.
The news is in the collaboration. DTCC’s positive standpoint was detailed in a report earlier this year.
Ideas of same-day settlement, “T+0”, were more vividly discussed last year but were put on the backburner after the winter’s GameStop drama. Notably, near-immediate settlement would disable possibilities to net payments for trades that go in opposite directions over the day – thus triggering more payment transactions and tying up money in these.
As news site Asset Servicing Times has picked up, financial industry consultancy SIONIC is weighing in behind the arguments for a shortened settlement cycle, discussing details in a whitepaper. “In its new whitepaper, SIONIC highlights that legacy mainframe-based infrastructures, green screens, manual workarounds and duplicative processing are still very much alive in the back offices of some of the largest global banks and in many small regional fully disclosed brokerage firms. SIONIC says that for far too long, the operational infrastructures at these firms have been underfunded and underappreciated,” the news site summarises.