The move by the US securities industry from a T+3 to T+2 settlement cycle in September 2017 introduced greater levels of safety and stability across equity markets, building upon the move from T+5 to T+3 almost two decades earlier. 现在, 这个行业 is eyeing a move to shorten the US standard settlement cycle for equities transactions once again, 这次是T+1, or achieving settlement one day after a trade is executed. Such a move would further reduce market risks and capital requirements, bringing margin relief and greater safety and resiliency to 这个行业.
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The industry discussion on the move to T+1 gained momentum in 2020 as the Covid-19 pandemic spread around the world, creating volatility and uncertainty across markets. A bout of additional market volatility in the first quarter of this year highlighted the level of risk that remains across financial markets, reinforcing the importance of the settlement cycle and cementing focus on the topic.
毕竟, any period of time between trade execution and trade settlement introduces risk, as it represents a window of time during which ownership of a security and the receipt of payment are in limbo. 要解决这个风险, firms need to provide margin to cover potential losses should a party to a transaction default on their obligation. Today, that margin covers the trade date plus two days. A move to T+1 would reduce this funding requirement by one day, significantly increasing market efficiency and mitigating risk, 尤其是在市场剧烈波动的时候.
同时, 更短的结算周期将释放流动性, 或保证金, 为确保交易的完成而举行的. 事实上, it is estimated that removing one day from the settlement cycle could bring a system-wide average of approximately 41% reduction in the volatility component of the margin that Depositary Trust and 清算 Corporation’s (存’s) National Securities 清算 Corporation (NSCC) subsidiary collects.
"Removing one day from the settlement cycle could bring a system-wide average of approximately 41% reduction in the volatility component of the margin that NSCC collects."
While such a move would not be without complexities, 这个行业 believes that T+1 is achievable with broad collaboration and coordination across a number of procedural and process changes to areas such as allocations, 肯定和否定过程, 票据交换所处理时间表, 证券借贷, 大宗经纪业务, foreign exchange and the global movement of securities and currency. 存, in partnership with industry associations the Securities Industry and Financial Markets Association and Investment Company Institute, is currently working on an analysis to assess each of these areas and define solutions and next steps, including the impact such a move would have on cross-border transactions.
桥过远
但是，为什么是T+1? 为什么不把重点放在T+0或实时结算上? Before examining potential benefits and risks of shortening the settlement cycle beyond T+1, 首先定义T+0. T+0 is when a trade settles on the same day it is executed or “same-day settlement”. 这与“实时结算”不同。, 当一笔交易被实时清算和结算时, 或立即.
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从处理的角度来看, 存 already has the operational capability to clear and settle transactions same-day on a T+0 basis. 事实上, more than one million same-day transactions are processed at 存’s depository every day. 也就是说, introducing T+0 across 这个行业 as the new standard settlement cycle for all transactions would be a far more complex undertaking, requiring foundational changes to how securities trade and settle today. This would include large scale redesigns of global settlements, 投资利润率, 融资, 外汇及证券借贷, 在其他关键考虑因素中.
最优沉降周期
A T+1 settlement cycle would substantially lower the level of risk and uncertainty arising from unsettled trades during market volatility while greatly enhancing capital efficiency. It would also allow firms to continue to take advantage of 存’s netting feature, 这是节省行业成本的关键. Central clearing and netting continue to be the most efficient and beneficial way of settling trades, which is critical to the safe and efficient functioning of the US capital markets. Every day, netting reduces the value of payments that need to be exchanged by an average of 98%. On an average day in 2020, 存’s NSCC netted down US$1.77 trillion dollars in total trade activity to a final settlement value of just under US$38 billion.
While the move to T+1 will deliver significant efficiency and safety to the system overall, 这个行业, 在其不断改进的愿望, will continue to analyze the impact of a future move to T+0 and will incorporate enabling functionality where applicable. However, T+1 is the optimal settlement cycle for right now. It will bring substantial benefits to 这个行业 and, with a coordinated effort, it is achievable.
This article was originally published in The Asset on September 13, 2021.