The Federal Deposit Insurance Corporation issued the reminder to firms ahead of the move from T+3, stressing the need to identify all lines of business, products and activities that involve securities settlement and servicing.
“Institution management should also monitor regulatory changes that affect securities settlement and servicing, system and process changes at financial market utilities, custodians’ system and process changes, and third-party system or service provider changes,” the US federal agency said.
Firms should look out for changes to operational procedures for securities clearance and settlement, income processing, corporate action processing and securities lending, as well as trust accounting or other securities processing systems.
Management also need to make sure they maintain oversight of third parties’ T+2 implementation processes and increase focus on risk management practices and surveillance systems to effectively identify and address potential increases in failed trades or processing exceptions.
The US set its move to a T+2 settlement cycle in motion in March when the Securities and Exchange Commission formally introduced widely expected rule amendments.
The amendment of Rule 15c6-1(a) was designed to enhance efficiency, reduce risk, and ensure a coordinated and expeditious transition by market participants.
Broker-dealers will be required to comply with the amended rule from 5 September, as recommended by the SEC’s industry steering committee.