The US, Canada, Mexico, Jamaica, and Argentina reduced their securities trade settlement periods from T+2 to T+1, aiming to improve market resilience in response to stress events, such as the failure of retail brokers to meet volatility-related capital calls in 2021.
“Despite occuring during a busy week for index rebalances, the transition concluded smoothly overcoming some isolated processing delays, with 92.76% of trades affirmed by 9pm on Tuesday, rising to 94.55% on Wednesday,” wrote the World Federation of Exchanges in emailed commentary. Similar moves are being considered worldwide, with the UK Accelerated Taskforce, European Union, and ASX all exploring following suit, while India moved to T+1 in January 2023.
Reuters reported that the shift in the world’s largest financial market is aimed at making market infrastructure more resilient, but investors and regulators braced for increased trade failures and other hiccups. The Securities Industry and Financial Markets Association (Sifma) said it was optimistic about the progress of the transition. “All T+1 implementation activities have been completed and appear to be operating normally,” the Investment Company Institute said in a statement.
“The first day of trading under T+1 settlement went smoothly,” said William Coleman, head of U.S. ETF Capital Markets at Vanguard. “While there may be some increased risk of failed trades as firms continue to adjust to the new settlement regime, we expect most trades will settle successfully today.”
In Mexico, an executive from the main stock exchange BMV said the move would help boost transaction volumes. “The fact that the trade settlement period has been shortened by one day reduces the exposure of portfolios and generates collateral resources that brokerage firms can use,” BMV executive Jiyouji Ueda said.
DTCC cited some processing delays overnight which have been resolved. “We are processing transactions normally,” a spokesperson said in a statement.
In Canada, T+1 changes were implemented successfully and are functioning as expected, despite some isolated delays, which were addressed, a spokesperson for TMX, owner of the Canadian Depository for Securities, said in an email.
“In an era where everything is marked by immediacy, it no longer made much sense to continue with settlement mechanisms from the last century,” said Alejandro Felix from Mexico’s main association of stock exchange entities.