Two men share securities regulation news

Breaking news and expert analysis on legal and compliance issues

[Back To Home][Back To Archives]

From Securities Regulation Daily, September 5, 2017

Industry Steering Committee lauds T+2 as compliance date arrives

By Mark S. Nelson, J.D.

Securities firms will begin complying with the SEC’s regulation shortening the settlement cycle from T+3 days to T+2 days as of today. Previously, firms observed a five-day settlement cycle before the Commission set T+3 as the standard in the 1990s. The Commission adopted the T+2 standard in its Securities Transaction Settlement Cycle release in March while setting the effective date at May 30, and targeting September 5 as the rule’s compliance date.

The SEC’s rule change; bank rules lag. Specifically, the Commission revised Exchange Act Rule 15c6–1 to provide that, other than for exempted securities, a broker-dealer may not enter into a contract for the purchase or sale of a security that provides for payment of funds and delivery of securities beyond the second business day after the contract. The rule includes some exceptions and would allow the parties to a transaction to agree to a different date.

In its adopting release, the Commission noted that U.S. banking regulations had not kept pace with the new T+2 settlement cycle, although the Commission suggested this would not present issues for implementation. But to ensure a smooth transition, the OCC and the FDIC recently proposed changes to align banking regulations with the T+2 settlement cycle. Neither the OCC nor the FDIC said they viewed the existing banking regulations as a hindrance to implementation of T+2. The OCC and FDIC had previously issued guidance about the industry-wide move to T+2.

Benefits of T+2. The Industry Steering Committee, formed by The Depository Trust & Clearing Corporation to solicit industry views on the transaction settlement cycle, noted today’s milestone in a press release touting how T+2 can reduce market and counterparty risk and increase financial stability for markets and investors. T+2 also aligns the U.S. with other global markets.

The Securities Industry and Financial Markets Association also noted its backing for the shorter settlement cycle based on many of the same reasons cited by DTCC. SIFMA published a brief FAQ in advance of the T+2 compliance date.

Firms were given significant time to adjust their trading systems to handle the shorter settlement cycle although the securities industry had long prepared for a Q3 2017 launch. The ISC issued a "playbook" suggesting a time frame for industry compliance, which appeared to influence the Commission’s selection of a compliance date in its final rule.

Companies: The Depository Trust [&] Clearing Corporation; Securities Industry and Financial Markets Association

MainStory: TopStory BrokerDealers ClearanceSettlement ExchangesMarketRegulation RiskManagement

Back to Top

Securities Regulation Daily

Introducing Wolters Kluwer Securities Regulation Daily — a daily reporting service created by attorneys, for attorneys — providing same-day coverage of breaking news, court decisions, legislation, and regulatory activity.

A complete daily report of the news that affects your world

  • View full summaries of federal and state court decisions.
  • Access full text of legislative and regulatory developments.
  • Customize your daily email by topic and/or jurisdiction.
  • Search archives for stories of interest.

Not just news — the right news

  • Get expert analysis written by subject matter specialists—created by attorneys for attorneys.
  • Track law firms and organizations in the headlines with our new “Who’s in the News” feature.
  • Promote your firm with our new reprint policy.

24/7 access for a 24/7 world

  • Forward information with special copyright permissions, encouraging collaboration between counsel and colleagues.
  • Save time with mobile apps for your BlackBerry, iPhone, iPad, Android, or Kindle.
  • Access all links from any mobile device without being prompted for user name and password.