IAA, Joint Trades Letter Requesting Later Compliance Date for Transition to T+1 Securities Settlement

October 10, 2022

---

 

Download PDF

Honorable Gary Gensler, Chair
U.S. Securities and Exchange Commission
100 F Street N.E.
Washington, DC 20549

Re: T+1 Transition Date

Dear Chair Gensler,

We the undersigned associations (the “Associations”) and The Depository Trust & Clearing Corporation (“DTCC”) appreciate the opportunity to continue to meet with you and the Commission staff to share our views on shortening the U.S. settlement cycle to T+1.[1] This partnership has been helpful as industry participants continue to prepare for the transition to T+1.

The transition date in the Commission’s proposed rules is March 31, 2024 or sooner. As highlighted in the Associations and DTCC’s comment letters in response to the Commission’s proposed rules, and as discussed in our dialogue with you and the Commission staff, the industry’s view is that a transition date of Tuesday, September 3, 2024 (after Labor Day weekend 2024) is a more appropriate date. In the industry’s view, transitioning on September 3, 2024 would reasonably ensure minimal potential for risk to the U.S. market and global investors, and would support the Commission’s objective to have market participants “prepare expeditiously” for T+1 settlement.

Importantly, this date falls immediately after the 2024 three-day Labor Day holiday weekend, during which time both the U.S. and Canadian financial markets will be closed, giving the industry an additional and necessary day to finalize the transition and address any unforeseen challenges. An aligned three-day holiday weekend only occurs once per year. The Canadian market has the most inter-listed U.S. securities[2] and is transitioning from T+2 to T+1 settlement in concert with the U.S. Additionally, adopting a T+1 settlement cycle in the U.S. before Canada may lead to an increase in cross-border fails and buy-ins. Furthermore, the Tuesday after the 2017 Labor Day holiday weekend was leveraged for the successful transition from T+3 to T+2.[3]

While recognizing the final rule is still under consideration, and may not become available for some time, the Associations and the DTCC are seeking clarity from the Commission on its position on the final transition date ahead of the publication of the final rule. Regulatory clarity and the expeditious release of a final rule will provide the industry assurances to meet their expected targets for planning, testing, and execution of T+1. Any delay or ambiguity in the final rule may put in jeopardy these industry efforts and timelines.

In preparation for the 2017 transition from T+3 to T+2, Chair White sent a letter to the industry in 2015 (see attached) providing certainty to the industry on the transition date ahead of the publication of the final rules. The Associations and the DTCC are respectfully requesting you to consider issuing a similar letter or statement setting out your position on the transition date ahead of the publication of the final rules given that the Commission has had time to review the industry comment letters submitted earlier this year.

Please be assured that our member firms will continue to assess, plan, and execute to meet the significant and extensive operational, process, and technological changes necessary with the transition to T+1, and such a letter or statement from yourself or the Commission more generally would help provide regulatory certainty to the industry as it prepares for an orderly transition to T+1.

The Associations and the DTCC appreciate the opportunity for continued collaboration and dialogue with you and the Commission. Our shared interest in managing risk while achieving an effective and efficient transition to T+1 remains aligned. Please feel free to reach out to the undersigned.

Sincerely,

Tom Price
Managing Director
Securities Industry and Financial Markets Association

Lindsey Weber Keljo
Head – Asset Management Group
Securities Industry and Financial Markets Association

Joanne Kane
Chief Operations Officer
Investment Company Institute

Murray C. Pozmanter
Head of Clearing Agency Services and Global Operations and Client Services
The Depository Trust & Clearing Corporation

Steven Wager
Chair, Americas Focus Committee
Association of Global Custodians

Gail C. Bernstein
General Counsel
Investment Adviser Association

Keith Evans
Executive Director
Canadian Capital Markets Association

Jennifer W. Han
Executive Vice President, Chief Counsel & Head of Global Regulatory Affairs
Managed Funds Association

Jiri Krol
Deputy Chief Executive Officer, Global Head of Government Affairs
Alternative Investment Management Association

Kristin Hochstein
ISITC Chair
ISITC

cc:
The Honorable Hester M. Peirce, Commissioner
The Honorable Caroline A. Crenshaw, Commissioner
The Honorable Mark T. Uyeda, Commissioner
The Honorable Jaime Lizárraga, Commissioner
Haoxiang Zhu, Director, Division of Trading and Markets
Jeffrey S. Mooney, Associate Director, Division of Trading and Markets
Matthew Lee, Assistant Director, Division of Trading and Markets

---

[1] See Shortening the Securities Transaction Settlement Cycle, Exchange Act Release No. 94196 (Feb. 9, 2022).
[2] Stock Market MBA, https://stockmarketmba.com/canadiancompaniesthattradeonusexchanges.php.
[3] A transition on the Labor Day weekend would be similar to the process used to transition to T+2. 2017. See Securities Exchange Act Release No. 80295 (March 22, 2017), 82 FR 15564, 15580-15581 (2017 T+2 Adopting Release), https://www.govinfo.gov/content/pkg/FR-2022-02-24/pdf/2022-03143.pdf.