Shortened Settlement Cycle What You Need To Know

Transcription

1 Shrtened Settlement Cycle What Yu Need T Knw

2 Table f Cntents Shrtened Settlement Cycle Chrnlgy September 5, 2017 Cnversin What Yu Shuld be Ding Tday US Rules and Regulatins Testing Cnversin Perid Supprt Industry Call Schedule Cntact List Issue Intake, Escalatin and Reslutin Bridge Line /Cmmunicatin Hub / Shared Site Crprate Actins & T+2 Items t Cnsider Questins 2

3 Chrnlgy 1995 The last time the U.S. settlement cycle was shrtened was in 1995, when it changed frm T+5 t T Mst Eurpean Unin member states harmnized their settlement cycles t T+2 in Other majr markets in the Asia/Pacific regin are already n T+2 r T+1. Fllwing an analysis f the ptential benefits f a mve t T+2, the Investment Cmpany Institute (ICI), Assciatin f Glbal Custdians and SIFMA endrsed a mve t a shrter settlement cycle. Representatives frm the industry, including SIFMA, DTCC, and ICI, then established an industry steering cmmittee ( ISC ), cmprised f abut twenty participants acrss key market segments, as a gverning bdy t versee the shrtened settlement cycle initiative n behalf f the industry. The ISC identified members f an industry wrking grup ( IWG ) f ver 300 experts t assist in the initiative. In respnse t a request frm then Securities and Exchange Cmmissin Chair White, SIFMA and ICI cmmissined Delitte & Tuche LLP t wrk with the ISC and develp a playbk detailing the requested infrmatin (the Playbk ). The Playbk identified remedial activities in which affected market participants needed t engage t prepare fr and implement the requirements f a T+2 settlement envirnment The relevant regulatrs prvided regulatry certainty as t the mve t a shrter settlement cycle thugh prpsing changes t relevant rules, including the SEC prpsing a change t the keystne settlement rule, Rule 15c6-1. Based n a thrugh analysis, the industry identified Tuesday, September, 5, as the least-risky day fr a transitin t a shrter settlement cycle. 3

4 September 5, 2017 Cnversin What is Happening Tuesday, September 5, 2017? Shrtening the securities settlement cycle frm trade date plus three days (T+3) t trade date plus tw days (T+2) Nrth America-Wide Tuesday, September 5, 2017 will be the first trade date n which an executed trade will settle trade date plus tw days (T+2) later regular way. On Thursday, September 7, the last trades that settle n a T+3 basis and the first trades settling n a T+2 basis will settle n the same day a duble settlement day. Prduct Scpe generally equity and fixed incme securities, and prducts cmprised f thse securities. Why T+2? Risk Reductin Risk is a functin f time. Fewer days, less risk. Capital Efficiency central cunterparty margin reductin allws firms t put capital t better use Prcess Efficiency Firms are using the mve t a shrter settlement cycle t lean batch prcesses and imprve straight thugh prcessing. Glbal Harmny the mve t T+2 will align Nrth America with ther majr glbal markets that currently perate in T+2. 4

5 What Yu Shuld be Ding Tday Cmmunicatin Ensure Service Prvider Readiness Update web pages Cnsider adding a message n client statements Adding T2 recding t call center lines Train Help Center staff n implicatins f T+2 System Readiness Wrking with yur IT teams t ensure readiness and migratin weekend activities The industry is planning n falling frward what are yur service prvider plans in case an issue arises T+2 Implementatin Activities Finalizing Migratin weekend run bk, call tree and ther T2 migratin activities 5

6 Cmmunicatin Cmmunicatin Ensure Service Prvider Readiness Update web pages Cnsider adding a message n client statements Adding T2 recding t call center lines Train Help Center staff n implicatins f T+2 Cmmunicatin with yur Service Prviders Are we ready? : What are yur cmmunicatin and cnversin perid plans? D yu have new cash prcesses (purchases)? Are there new Service Level Agreements that I need t be aware f due t this change? Cmmunicatin t yur custmers (internal and external) What may change? Is ur peratins staff (internal custmers) aware f prcedural updates? Cash and funding requirements (check prcessing) may require mdificatins Crprate Actin entitlement dates are shrtening (ex date changes) 6

7 US Rules and Regulatins On March 22, 2017, the SEC amended Exchange Act Rule 15c6-1 t shrten the standard settlement cycle t T+2. Subsequently, nine SROs have changed 48 f their wn rules, falling int a number f categries: Dates by which t take certain crprate r ther actins Changes t prcesses assciated with settlement Cnfirmatin/affirmatin The Office f the Cmptrller f the Currency and the FDIC have rules still in analysis the Cmptrller released guidance saying that regulated entities (e.g., custdy banks) shuld cnfrm their actins with the amended settlement cycle, pending expected adptin f cnfirming rule amendments. Certain rules are affected by the change in the settlement cycle, even thugh the rules themselves have nt been changed, including: Reg SHO Reg T (See FINRA Extensin Prcess Changes Regulatry Ntice 17-12) Other prcesses The migratin/effective date acrss the industry, fr all rule changes, is September 5, 2017 dn t anticipate relief frm the SEC r ther regulatrs. 7

8 US Rules and Regulatins SEC, 1 NYSE, 8 NASDAQ, 6 MSRB, 2 FINRA, 8 FDIC, 1 Off. Cmp. Currency, 1 NSCC, 8 DTC, 7 Optins Clearing Crp, 7 Regulatr Rule Changes FINRA 8 MSRB 2 NASDAQ 6 NYSE 8 SEC 1 FDIC 1 (in analysis) Off. Cmp. Currency 1 (guidance issued) NSCC 8 DTC 7 Optins Clearing Crp 7 Grand Ttal 49 Links t US Rule Set US 8

9 Testing Internal Testing Cunterparties Vendrs and Service Prviders Clearing Firms and Custdy Banks Industry Testing Testing Cycles 1-14 Crprate Actins Duble Settlement Findings NSCC participants accunts with n test activity NSCC participants accunts with test activity 93% 7% P E R C E N T O F N S C C M E M B E R S W H O H AV E T E S T E D W E I G H T E D BY VO LU M E Have Tested 99.79% Have Nt Tested 0.21% 9

10 Testing 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 100% 98% Tp 50 NSCC Accunts/Rev. (95% f Vl.) Have Tested Have Nt Tested NSCC Accunts/Rev. (4% f Vl.) 2% 13% 87% All Other NSCC Accunts (1% f Vl.) 10

11 Cnversin Perid Supprt Last T+3 Trade Date Cnversin Weekend First T+2 Trade Date In-Flight Tue. Sept. 5 T+2 Trades Duble Settlement Fri. Sept. 1 Sat. Sept. 2 Sun. Sept. 3 Mn. Sept. 4 Tue. Sept. 5 Wed. Sept. 6 Thur. Sept. 7 Gal/Objective Ensure a smth cnversin t T+2 settlement by executing a clear and transparent cnversin perid supprt plan, which will include the regular cmmunicatin f critical status infrmatin, transparency int the activity f ther participants, and issue identificatin, escalatin and reslutin. Elements In-Flight Fri. Sept. 1 T+3 Trades Cntact List Quick Access t Key Industry and Market Infrastructure Staff Bridge Line Single Open Line fr Industry Cmmunicatins with Scheduled Rally-Times Cmmunicatin Hub Staffed Tuch-Pint fr Official Prject Infrmatin Shared Site Live Status, Cntacts and Issue Tracking Infrmatin Issue Tracking Prvide Structured Issue Intake, Escalatin and Reslutin Activity Schedule Track Majr Milestnes and Knw What Cmes Next Success Criterin Develp, Track and Analyze Metrics fr Prject Success 11

12 Industry Call Schedule Fri. Sept. 1 Sat. Sept. 2 Sun. Sept. 3 Mn. Sept. 4 Tue. Sept. 5 Wed. Sept. 6 Thu. Sept. 7 Fri. Sept. 8 MKT Status Open T+3 Clsed Clsed Clsed Open T+2 Open T+2 Open T+2 (Duble) Open T+2 Call Checkpint Checkpint Checkpint Checkpint Bridge Checkpint Bridge Checkpint Bridge Line Checkpint Time ET 4:30-5:30pm 9:00 10:00am 9:00 10:00am 9:00 10:00am 4:30 5:30pm 7:00 am 5:30pm 7:00 am 5:30pm 7:00 am 9:00am 1:00 2:00pm 9:00 10:00am 7:00 am :00 am :00 am :00 am :00 am :00 pm :00 pm :00 pm :00 pm :00 pm :30 pm 5:30 pm 9:00 am 10:00 am 9:00 am 10:00 am 9:00 am 10:00 am 4:30 pm 5:30 pm 5:00 pm :00 pm :00 pm :00am 5:30pm 8:30 am 9:30 am 2:00 pm 3:00 pm 4:30 pm 5:30 pm 7:00am 5:30pm 8:30 am 9:30 am 2:00 pm 3:00 pm 4:30 pm 5:30 pm 7:00am 12:00pm 1:00 pm 2:00 pm 9:00 am 10:00 am

13 Cntact List Area Name Cmpany Wrk # Cell # Cmmand Center Will Leahey SIFMA wleahey@sifma.rg Cmmand Center Tm Price SIFMA tprice@sifma.rg Cmmand Center Jhn Abel DTCC jabel@dtcc.cm Cmmand Center Marty Burns ICI mburns@ici.rg Cmmand Center Ahmed El Ghazaly ICI Ahmed@ici.rg Brker Dealer Jhn Smith XYZ Brkerage jsmith@xyz.cm Clearing Firm Jane De ABC Clearing Jde@abcclearing.cm Custdy Bank Zha Liu Alpha Custdy Zliu@alpha.cm Asset Manager Jan Jansen First Investing JJansen@first.cm Ask: t receive critical cmmunicatins frm the Cmmand Center during the cnversin perid, please send yur T+2 Prject Manager s Cntact Infrmatin t will Leahey: wleahey@sifma.rg 13

14 Cmmand Center Escalatin and Reslutin Issue Intake Suggested Issue Reslutin Scializatin Cmmand Center Analysis 14

15 Bridge Line /Cmmunicatin Hub / Shared Site Bridge Line Single pen cnference line fr industry cmmunicatins Scheduled rally-times based n high activity Cmmunicatin Hub Staffed tuch-pint fr fficial prject infrmatin Issue intake and escalatin pint Prject Manger Cntact List Shared Website Live status, cntacts and issue tracking infrmatin Helpful links t ther Cmmand Center resurces 15

16 Crprate Actins & T+2 Crprate Actin Prcessing Changes Ex-Dates Cver/Prtect Date Calculatins Dividend Reinvestment Prgrams (DRIPs) Liability Ntices What t Knw 9/5 will nt be ruled an Ex-date Events pst 9/5 already exist with new lgic Watch Areas 16

17 Items t Cnsider Sell side / Buy side tips r issues t cnsider ETF Primary Market Create/Redeem Prcess Securities Lending Recall perid shrtening t match settlement Master Securities Lending Agreement (MSLA) Standing Settlement Instructins (SSIs) Testing with Service Prviders and Custdians Same Day Affirmatin as Best Practice Other FAQs Agency CMOs Regulatin SHO Equity Derivatives 17

18 Questins? 18