Associations Tout Successful T+1 Change, Warn Against T+0

Three bodies closely associated with the recent change to T+1 settlement in North American securities markets have published a report citing the successful transition, but warning about progressing towards T+0.

The Securities Industry and Financial Markets Association (SIFMA), Investment Company Institute (ICI), and The Depository Trust & Clearing Corporation (DTCC) released the paper, T+1 After Action Report, and reviews the general project timeline for the shortened settlement cycle, including its key milestones and achievements. It also discusses several of the obstacles overcome in the three-plus year transition, the groundswell of global participation with the US move, and some of the initial data points and positive impacts of the shift.

SIFMA, ICI, and DTCC say they first began working on accelerating settlement from T+2 in 2021, and collaborated on leading the industry’s efforts to plan, coordinate and implement the successful transition to T+1, which became effective on 28 May, 2024. “Firms now can make better use of their capital and resources while promoting financial stability,” they state. “Ultimately, T+1 has provided the appropriate balance between increasing efficiencies and mitigating risk for the industry.”

The associations argue the move to T+1 was successful, as demonstrated by various metrics involving affirmations, clearing funds and fail rates. They observe that nearly 95% of transactions are meeting the affirmation criteria by the cut-off time, a notable improvement on the 73% rate recorded at the end of January 2024.

Equally, In the T+1 environment, the NSCC Clearing Fund decreased on average by $3.0 Billion (23%) from the prior three-month average value of $12.8 Billion in a T+2 environment to $9.8 Billion. The NSCC Clearing Fund decreased on average by $2.4 Billion (20%) from the prior month average value of $12.2 Billion in a T+2 environment to $9.8 Billion post T+1 implementation.

Finally, they state that the average continuous net settlement (CNS) fail rate for July 2024 was 2.12%, consistent with T+2 settlement rates, as was the average DTC non-CNS fail rate, at 3.31%.

Although it highlights the success of the changeover, the paper also discusses why, despite the achievement, moving to T+0 (or same-day settlement) is not simply the next step in the process. “It would require a comprehensive independent review,” the associations state. “While T+1 has brought many benefits, further accelerating to T+0 as an industry standard could introduce significant risks and complexities. Instead, the focus should remain on global market adoption of T+1.”