Washington DC
29 September 2016
Reporter: Drew Nicol

SEC agrees next step in T+2 transition


The US Securities and Exchange Commission (SEC) has voted in favour of shortening the standard settlement cycle for broker-dealer securities transactions from T+3 to T+2.

The proposed amendment aims to tackle credit, market and liquidity risks related to the value and number of unsettled securities transactions prior to the completion of settlement.

The current timeline for implementation of the shortened settlement cycle will see the amendment take effect on 5 September 2017.

“Today’s proposal to shorten the standard settlement cycle is an important step in the SEC’s ongoing efforts to enhance the resilience and efficiency of the U.S. clearance and settlement system,” said SEC chair Mary Jo White.

“The benefits of a shortened settlement cycle should extend to all investors, not just those directly involved in the trading, clearing and settling of securities transactions.”

The vote in favour of the amendment was swiftly commended by the Options Clearing Corporation (OCC) and the Securities Industry and Financial Markets Association (SIFMA).

OCC executive chair and CEO Craig Donohue commented: “We are pleased the SEC has approved the clearing agency rules, as this was an important priority for OCC and the US listed options industry.”

“It also is a critical step toward an equivalency agreement between the SEC and the European Commission that will allow central counterparties (CCPs) such as OCC who are subject to SEC regulation to be eligible for recognition by the European Securities and Markets Association and for attaining qualified CCP status for purposes of European capital regulation.”

SIFMA president and CEO Kenneth Bentsen added: “Shortening the time it takes to settle a trade will bring numerous benefits to investors and the US financial system, including reducing operational risk, enhancing the overall efficiency of US securities markets and aligning the US with other international markets. This is truly a win for investors, the industry and all market participants.”

“We also commend the self-regulatory organisations overseen by the SEC, including the Financial Industry Regulatory Authority, the New York Stock Exchange, Nasdaq and the Municipal Securities Rulemaking Board, for their ongoing efforts to update their rulebooks to support a shortened settlement cycle.

Following the vote on Rule 15c6-1(a) of the Exchange Act of 1934, a 60-day comment period will occur once it has been logged in the Federal Register.

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