DTCC proposes changes to “modernise” its US equity market structure
23 January 2018 New York
Image: Shutterstock
The Depository Trust & Clearing Corporation (DTCC) has unveiled a series of proposals to “modernise” its current US equity market structure.
The proposals look to provide better access to shortened settlement processing options, for both pre-and post-trade transactions, while improving straight through processing.
DTCC said that, following the success of the industry moving from trade date-plus-three days (T+3) to trade date-plus-two days (T+2) settlement in 2017, “one of the last remaining exposures is time”.
It explained that “time increases the risk of an unpredictable event that could significantly affect the transfer of cash or ownership of securities from the point of execution through settlement.”
DTCC proposes to mitigate this time risk through accelerated time to settlement and settlement optimisation.
DTCC said it will partner with its clients and with regulatory supervisors to further develop these proposals, subject to any required regulatory approvals.
DTCC is also proposing to move settlement of eligible equity trades at its subsidiary, National Securities Clearing Corporation (NSCC), from the afternoon of settlement date to the morning before market open.
According to DTCC, this will remove a market day of settlement exposure without eliminating a calendar day.
Murray Pozmanter, managing director and head of clearing agency services at DTCC, said: “By optimising settlement and accelerating settlement beyond T+2, firms will be able to significantly reduce capital requirements, systemic risk and operational costs while preserving the resiliency of the current infrastructure.”
“This represents an important step toward leveraging the gains we have seen with T+2 to achieve even greater efficiencies for the industry.”
The proposals look to provide better access to shortened settlement processing options, for both pre-and post-trade transactions, while improving straight through processing.
DTCC said that, following the success of the industry moving from trade date-plus-three days (T+3) to trade date-plus-two days (T+2) settlement in 2017, “one of the last remaining exposures is time”.
It explained that “time increases the risk of an unpredictable event that could significantly affect the transfer of cash or ownership of securities from the point of execution through settlement.”
DTCC proposes to mitigate this time risk through accelerated time to settlement and settlement optimisation.
DTCC said it will partner with its clients and with regulatory supervisors to further develop these proposals, subject to any required regulatory approvals.
DTCC is also proposing to move settlement of eligible equity trades at its subsidiary, National Securities Clearing Corporation (NSCC), from the afternoon of settlement date to the morning before market open.
According to DTCC, this will remove a market day of settlement exposure without eliminating a calendar day.
Murray Pozmanter, managing director and head of clearing agency services at DTCC, said: “By optimising settlement and accelerating settlement beyond T+2, firms will be able to significantly reduce capital requirements, systemic risk and operational costs while preserving the resiliency of the current infrastructure.”
“This represents an important step toward leveraging the gains we have seen with T+2 to achieve even greater efficiencies for the industry.”
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