The Securities and Exchange Commission recently adopted an amendment to the Securities Exchange Act of 1934 that shortens the settlement cycle from three days after trade (T+3) to two days after trade (T+2), effective Sept. 5. The amended rule is designed to enhance efficiency, reduce risk, and ensure a coordinated and expeditious transition by market participants to a shortened standard settlement cycle.
And there is already some discussion about moving to T+1 in the not-too-distant future.
Computershare has actively participated in the various industry working groups and committees focused on shortening the settlement cycle. Industry-wide testing is underway and all indications are that we will meet the implementation date.
Former SEC Chairwoman Mary Jo White has previously said of T+2, "Shortening the settlement cycle should yield important benefits that ultimately flow to investors – including reduced clearing capital requirements for broker-dealers, reduced pro-cyclical margin and liquidity demands on market participants, and increased global harmonization of settlement cycles."
While the change to T+2 will have little impact on the day-to-day business between Computershare and our clients, you should consider the following:
- Will the change in the settlement date impact the timelines for any processes at your firm that are built around settlement date, such as option issuances, treasury buybacks and other share movements? Your letters of instruction will have to reflect this change.
- Does your firm have any shareowner communications that reference settlement date that may need to be updated, such as form letters, company websites, internal policies/procedures and registered plan prospectuses? We will review your DSPP/DRP plan prospectus and reach out to you if we identify any issues.
We look forward to the final enactment of T+2 settlement – not only because it will improve investors' experience by shortening the turnaround on their trades, but because it will also reduce risk, provide operational process improvements, lower collateral requirements, and bring the U.S. more in line with international settlement practices.
For more information on T+2 as well as FAQs, visit www.ust2.com