Industry Coordination Led to Successful Transition, Reducing Risk and Costs in the System
Washington, DC, September 12, 2024 – The Securities Industry and Financial Markets Association (SIFMA), Investment Company Institute (ICI), and The Depository Trust & Clearing Corporation (DTCC) today released the “T+1 After Action Report,” which reviews the general project timeline for the shortened settlement cycle, including its key milestones and achievements. It also discusses several of the obstacles overcome in the three-plus year transition, the groundswell of global participation with the U.S. move, and some of the initial data points and positive impacts of the shift.
SIFMA, ICI, and DTCC first began working on accelerating settlement from two days after trade date (T+2) to one day after trade date (T+1) in 2021, intending to reduce settlement risk across U.S. capital markets. The organizations collaborated on leading the industry’s efforts to plan, coordinate and implement the successful transition to T+1, which became effective on May 28, 2024. Firms now can make better use of their capital and resources while promoting financial stability. Ultimately, T+1 has provided the appropriate balance between increasing efficiencies and mitigating risk for the industry.
The move to T+1 was successful, as demonstrated by various metrics:
Affirmations:
- Nearly 95% of transactions are meeting the affirmation criteria by the 9:00 PM ET cutoff on the trade date, as set by The Depository Trust Company (DTC). This marks a notable improvement from the 73% affirmation rate recorded at the end of January 2024.
Clearing Fund:
- In a T+1 environment, the NSCC Clearing Fund decreased on average by US$3.0 Billion (23%) from the prior three-month average value of US$12.8 Billion in a T+2 environment to US$9.8 Billion. The NSCC Clearing Fund decreased on average by US$2.4 Billion (20%) from the prior month average valueof $12.2 Billion in a T+2 environment to US$9.8 Billion post T+1 implementation.
Fail Rates:
- The average CNS Fail Rate for July 2024 was 2.12%, consistent with T+2 settlement rates.
- Similarly, the average DTC non-CNS fails rate was 3.31%. Again, consistent with T+2 settlement averages.
The report highlights the workstreams undertaken to achieve T+1 including ETFs and international issues as well as the need for close coordination across the industry, with the participation of market participant firms, infrastructure providers, and industry associations in the U.S. and internationally.
The report covers the coordinated support and work the industry did before, during and after transition weekend, including an Industry Command Center hosted by SIFMA that was critical to the success of the go-live and was a key enabler of the smooth transition.
Finally, the report discusses why, despite the success of the U.S. move to T+1, moving to T+0 (or same-day settlement) is not simply the next step in the process. It would require a comprehensive independent review. While T+1 has brought many benefits, further accelerating to T+0 as an industry standard could introduce significant risks and complexities. Instead, the focus should remain on global market adoption of T+1.
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About SIFMA
SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s one million employees, we advocate on legislation, regulation and business policy affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA).
About ICI
The Investment Company Institute (ICI) is the leading association representing regulated investment funds. ICI’s mission is to strengthen the foundation of the asset management industry for the ultimate benefit of the long-term individual investor. ICI’s members include mutual funds, exchange-traded funds (ETFs), closed-end funds, and unit investment trusts (UITs) in the United States, and UCITS and similar funds offered to investors in other jurisdictions. Its members manage $35.1 trillion invested in funds registered under the US Investment Company Act of 1940, serving more than 100 million investors. Members manage an additional $9.1 trillion in regulated fund assets managed outside the United States. ICI also represents its members in their capacity as investment advisers to certain collective investment trusts (CITs) and retail separately managed accounts (SMAs). ICI has offices in Washington DC, Brussels, and London and carries out its international work through ICI Global.
About DTCC
With over 50 years of experience, DTCC is the premier post-trade market infrastructure for the global financial services industry. From 20 locations around the world, DTCC, through its subsidiaries, automates, centralizes, and standardizes the processing of financial transactions, mitigating risk, increasing transparency, enhancing performance and driving efficiency for thousands of broker/dealers, custodian banks and asset managers. Industry owned and governed, the firm innovates purposefully, simplifying the complexities of clearing, settlement, asset servicing, transaction processing, trade reporting and data services across asset classes, bringing enhanced resilience and soundness to existing financial markets while advancing the digital asset ecosystem. In 2023, DTCC’s subsidiaries processed securities transactions valued at U.S. $3 quadrillion and its depository subsidiary provided custody and asset servicing for securities issues from over 150 countries and territories valued at U.S. $85 trillion. DTCC’s Global Trade Repository service, through locally registered, licensed, or approved trade repositories, processes more than 20 billion messages annually. To learn more, please visit us at www.dtcc.com or connect with us on LinkedIn, X, YouTube, Facebook and Instagram.
