On Sept. 5, the settlement cycle in the U.S. (and Canada) will shorten from three days after the trade date (T+3) to two days (T+2).
Computershare has invested significant time and resources to identify and prepare for the necessary technology enhancements and process changes. We are confident that we will be fully ready for the September 5 change.
Issuers and employee plan administrators also need to do some planning and preparation.
Issuers need to be aware that as a result of the transition, trades from both Sept. 1 (T+3 rules plus Labor Day) and from Sept. 5 (T+2 rules) will settle on Sept. 7. FINRA, the MSRB and the national exchanges, including NYSE and Nasdaq, have together established a rule to not allow any securities to have an ex-dividend on September 5, 2017. To avoid an ex-dividend date of September 5, 2017 under this rule, issuers are advised to NOT set September 1, 2017 as the payment date for any dividend or distribution that may exceed 25% of the value of the security .
In a recent update, NASDAQ provides the following example regarding record dates and ex-dividend dates: the first record date to which the new ex-dividend date will be applied will be Thursday, Sept. 7, 2017. Here are the anticipated "regular" ex-dividend date rulings over the conversion time:
The shorter settlement time will mean employee trades are settled more quickly. However employee plan administrators will need to adjust procedures to make sure transactions take place on time – there will no longer be much "wiggle room" for adjustments to transactions.
Jessica Ladden of Computershare recently joined Kathleen Martell, senior analyst of executive compensation at Ball Corporation, in a webinar to discuss what plan administrators need to do in the coming months to be ready for T+2, including real-world examples of how to optimize processes and avoid pitfalls. The webinar covered:
Shortening the settlement cycle to T+2 will bring North American settlement times into alignment with the rest of the world – shortening the turnaround on investors' trades, as well as reducing risk, improving operational processes, and significantly reducing the cost to market participants of having their assets tied up over the course of the transaction.
Computershare clients can contact their relationship manager with any questions or concerns about the transition to T+2.
Computershare has invested significant time and resources to identify and prepare for the necessary technology enhancements and process changes. We are confident that we will be fully ready for the September 5 change.
Issuers and employee plan administrators also need to do some planning and preparation.
Timing of trades and dividends
Issuers need to be aware that as a result of the transition, trades from both Sept. 1 (T+3 rules plus Labor Day) and from Sept. 5 (T+2 rules) will settle on Sept. 7. FINRA, the MSRB and the national exchanges, including NYSE and Nasdaq, have together established a rule to not allow any securities to have an ex-dividend on September 5, 2017. To avoid an ex-dividend date of September 5, 2017 under this rule, issuers are advised to NOT set September 1, 2017 as the payment date for any dividend or distribution that may exceed 25% of the value of the security .
In a recent update, NASDAQ provides the following example regarding record dates and ex-dividend dates: the first record date to which the new ex-dividend date will be applied will be Thursday, Sept. 7, 2017. Here are the anticipated "regular" ex-dividend date rulings over the conversion time:
- Record date 9/5/2017; ex date 8/31/2017
- Record date 9/6/2017; ex date 9/1/2017
- Record date 9/7/2017; ex date 9/6/2017
Employee plan administration
The shorter settlement time will mean employee trades are settled more quickly. However employee plan administrators will need to adjust procedures to make sure transactions take place on time – there will no longer be much "wiggle room" for adjustments to transactions.
Jessica Ladden of Computershare recently joined Kathleen Martell, senior analyst of executive compensation at Ball Corporation, in a webinar to discuss what plan administrators need to do in the coming months to be ready for T+2, including real-world examples of how to optimize processes and avoid pitfalls. The webinar covered:
- Processes that need to be reviewed and updated
- The right people to involve in process reviews
- Automation solutions that can help
- Roles of your vendors in this transition
You can access a recording of the webinar and download the presentation here.
Advantages of T+2
Shortening the settlement cycle to T+2 will bring North American settlement times into alignment with the rest of the world – shortening the turnaround on investors' trades, as well as reducing risk, improving operational processes, and significantly reducing the cost to market participants of having their assets tied up over the course of the transaction.
Computershare clients can contact their relationship manager with any questions or concerns about the transition to T+2.