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Trading

T+2 transition went smoothly in Canada

CIBC Mellon’s Lou Lesnika

The reduction of the trade settlement cycle to trade plus two days, or T+2, in Canada, effective Sept. 5, went as smoothly as it did in the U.S.

"The transition to T+2 trading was effectively implemented in Canada … in alignment with the U.S. market," said Lou Lesnika, assistant vice president, trade settlements, at Canadian custodian CIBC Mellon, Toronto. "During its transition to T+2, CIBC Mellon actively monitored its trading activity and determined that its systems were successfully migrated to support the new settlement cycle."

The transition from T+3 was successful, according to a statement from CDS Clearing and Depository Services Inc., a subsidiary of Toronto Stock Exchange parent TMX Group. CDS also noted that Sept. 7 — the final settlement date for T+3 trades as well as the first settlement date under T+2 because of the Labor Day holiday — went smoothly.

Mr. Lesnika as well as CDS said the coordination and planning that went into the move to T+2 made the transition work well. "Canada's transition to a T+2 settlement cycle was carefully coordinated among hundreds of stakeholders, market participants and financial institutions in Canada, the U.S. and other markets," Mr. Lesnika said.

"There is an old saying in the securities industry that 'nothing good happens between trade date and settlement date,'" said Keith Evans, executive director of the Toronto-based Canadian Capital Markets Association, in a news release. "Competitors working together have just accomplished a one-third reduction in this time period."

Mr. Evans attributed the successful change to the cooperation among all parts of the Canadian capital markets industry as well as Canadian regulators, association members and their counterparts in the U.S.

Mr. Lesnika of CIBC Mellon said while the efforts worked well, much more coordination would be needed to reduce the settlement cycle further.

"In the future, if there is enough interest among institutional investors in shortening Canada's settlement cycle, I expect the initiative would be explored through a coordinated and consultative industry effort, similar to the T+2 initiative," Mr. Lesnika said. "Given the substantial volume of cross-border trading activity between Canada and the U.S., we anticipate that we would work in a harmonized effort with the U.S. market should it consider reducing its settlement cycle even further. Canada's move to a shorter settlement cycle would be dependent on the U.S. moving to a shorter settlement."