The movement to accelerate the U.S. securities settlement cycle is gaining momentum with backing from major industry groups and the chairman of the Securities and Exchange Commission.
A report published Dec. 1 from the Securities Industry and Financial Markets Association, the Investment Company Institute and the Depository Trust and Clearing Corp. said shortening the settlement cycle to T+1 — settling a trade one business day after it is executed — from T+2, or two business days, will enhance efficiency and reduce risks and costs for the industry.
"Shifting to T+1 will strengthen the financial system and offers tangible benefits to investors by reducing their risk exposure and enabling them to more quickly leverage investment opportunities," said Eric J. Pan, Washington-based president and CEO at ICI, an association of regulated funds including mutual funds, exchange-traded funds and closed-end funds, in a statement.
Following a white paper on the shift to T+1 published in February by DTCC, a U.S. clearing and settlement service provider, the U.S. financial industry formed an industry steering committee and industry working group to develop a consensus for an accelerated settlement cycle. The report unveiled earlier this month summarizes their work and recommends a path forward.