U.S. T+2 implementation set for September 2017

The U.S. T+2 Steering Committee set Sept. 5, 2017, as the target date for a switch to a T+2 settlement cycle from the current T+3 cycle, said the Depository Trust & Clearing Corp., which organized the committee.

The recommended implementation date requires regulatory approval and is also contingent on successful industrywide testing beginning in the second quarter of next year, said a news release from DTCC.

The switch, once implemented, would shorten the U.S. settlement cycle for equities, corporate and municipal bonds, and unit investment trust trades to two days after the trade, or T+2, from the current three-day settlement cycle.

The date was set based on avoiding high-volume trading days, large corporate action days or holidays. In the committee's previous guidance on a reduced settlement cycle, it had set a target of the third quarter 2017 for U.S. implementation.

The U.S. has been working under T+3 since 2003, and the move is seen as leading the rest of the world to move to two-day settlement. European markets shifted to T+2 in 2014.

Proponents of the reduced cycle say it will reduce counterparty risk; harmonize settlement times between the two largest markets, the U.S. and Europe; simplify trade-data matching among parties involved in the settlement process; and increase short-term liquidity. However, others have expressed concern that the shortened cycle will make it more difficult to correct errors in complex trades.

Settlement cycle reduction has the backing of the Securities and Exchange Commission, with Chairwoman Mary Jo White in 2015 endorsing recommendations of the steering committee, an industry group with representatives of both the buy side and sell side.

A DTCC spokesman was unable to provide further information by press time.