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US T+2: All Thatís Left Is the Execution

T+2 settlement is right around the corner for the US. What will it take to get from where the industry is now to implementation?

The realization of a T+2 settlement cycle in the US financial markets for trades in equities, corporate and municipal bonds, and unit investment trusts (UITs) moved one step closer to realization earlier this month with the joint announcement by the Depository Trust and Clearing Corporation (DTCC), Securities Industry & Financial Markets Association (SIFMA), and Investment Company Institute (ICI) of the formation of an Industry Steering Committee (ISC) and Working Group (IWG) tasked with driving the implementation of T+2 in the United States.

The ISC, co-chaired by executives of ICI and SIFMA, is made up of senior-level representatives from associations and firms representing stakeholders, both buy-side and sell-side. The ISC will be responsible for overseeing the US move to T+2; driving the deliverables of the Industry Working Group (IWG); providing guidance and support to address technological and process building blocks; and communicating changes to the industry. The IWG will be responsible for “identifying and executing a tactical plan to implement the business and rule changes required.”

According to John Abel, vice president responsible for managing the effort on behalf of the DTCC, the actual work effort will be undertaken by five working groups reporting into the IWG. These working groups (nicknamed “Alpha,” “Bravo,” etc., in an apparent effort to instill military-like intensity around the exercise) are focused roughly on product-specific requirements and scope, buy-side issues, operational issues, street-side issues, and legal and regulatory changes. A preliminary exercise has been completed to define the market segments most impacted by these workstreams, and the working groups are scheduled to meet as early as next week.

All of this was laid out by Abel in a presentation at Banking Reloaded, the annual Zicklin-Capco conference at Baruch College on October 29. Abel’s presentation highlighted the effort required to bring sufficient consensus within the industry to make a commitment to T+2 possible. He also recapped the results of a study by BCG reported in WS&T earlier. The audience at the Zicklin-Capco event expressed overall support, although some veterans lamented lack of a regulatory mandate to reduce settlement times, and others noted the difficulty in prioritizing this activity against other non-revenue generating “must-dos.”

Abel also announced a new website with an easy-to-remember URL, www.UST2.com. While sparsely populated at the moment, it does provide background as well as a complete list of current ISC and IWG members. Stay tuned.

Jennifer L. Costley, Ph.D. is a scientifically-trained technologist with broad multidisciplinary experience in enterprise architecture, software development, line management and infrastructure operations, primarily (although not exclusively) in capital markets. She is also a ... View Full Bio
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