T+2 Implementation Moves Forward Without a Hitch

Investment Company Institute (ICI) chief industry operations officer and co-chair of the T+2 Industry Steering Committee Marty Burns says that as a whole, the transition had minimal problems.

“There were no major issues during the transition, which we can base on the time and effort that was spent preparing for this moment,” Burns tells WatersTechnology. “There were a handful of small problems relating to corporate actions but that was resolved quickly and had no material impact at all.”

The industry steering committee, which consists of the ICI, the Securities Industry and Financial Markets Association (Sifma), the Depository Trust and Clearing Corp. (DTCC) along with other industry players, set up a command center to handle any issues stemming from the shorter settlement cycle. The center opened on the first day of T+2, September 5, until September 7.

Sifma managing director for operations and technology Tom Price says careful planning and industry participation from both the buy and sell sides contributed to how smoothly the project ran. The committee will be gathering statistics around the transition for a report that will be sent to regulators. This report can be used as a guide for future industry-wide projects, including possibly shortening the settlement cycle again.

“In the interest of transparency, we hope that we can also publish something for the public around the process we followed,” Price says.

The report is being put together by the working group in conjunction with the DTCC.

John Abel, vice president for product management, settlement and asset services at the DTCC, says the clearinghouse has already seen some benefits coming from the move to T+2.

“We are now in the process of capturing key statistics and are continuing to monitor performance. What we have seen is most numbers have improved,” Abel says. “It’s not official yet but it looks like fail rates for trades have gone down, maybe because firms—in anticipation of T+2—made efficiencies in their processes.

The move to T+2 was envisioned to bring down risks associated with settlement including the margin requirements from the National Securities Clearing Corp. (NSCC). When the statistics from the first few weeks of implementation come in, the data will be sent to the NSCC as well.

With the transition over, members of the working group say the extensive planning done before implementation made them confident.

“We expected it to go well and it did,” says Price.