Transition to T+2 settlement successful: CCMA

Canada’s transition to the T+2 settlement passed smoothly, says the Canadian Capital Markets Association (CCMA) in a report.

T+2 Project: Post-Mortem Report found the settlement was completed on schedule, on budget and without market disruption or unexpected negative effects on investors or other stakeholders.

CCMA analyzed the work carried out between 2015 and 2017 to shorten the payment cycle for securities bought from three to two business days after a transaction. T+2 trading and settlement of equity and debt securities, and for the purchases and redemption of mutual funds, started in Canada on Sept.5, 2017.

This means when investors buy stocks, long-term bonds, mutual funds and certain other products, they pay for the securities a day earlier. Investors selling or redeeming the investments are also paid a day sooner, reducing the risk of non-payment and improving efficiency.

The changes were coordinated with similar conversions in the U.S. and other global markets.

Read: Here’s how T+2 settlement will soon affect investors

The report described the transition and some of challenges during the project. Payment or settlement of securities bought on Sept. 1 and Sept. 5 was completed without incident on Sept. 7, a double settlement day with a value of billions of dollars.

Moving to T+1

CCMA says capital markets stakeholders must still look to the future and be ready for a further shortening of the settlement cycle.

“Whereas the move to T+2 was about doing the same things faster, moving to T+1 or less will be much more challenging,” said Keith Evans, executive director of the CCMA, in a release.

Achieving a further shortening of the settlement cycle will:

• Require fundamental technology and process changes to move away from overnight batch processing;
• Take substantially more work, time, money, and co-ordination;
• Carry much greater transition risk; and need certainty and clarity on all aspects of the change as early as possible.

Therefore, CCMA will continue to monitor global developments on this topic.

Read the full report here.

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