Economy & Markets

The move to a two-day settlement cycle is expected to help reduce overall systemic risk, enhance capital efficiency and reduce costs

By James Langton |

Canadian market participants successfully concluded efforts to transition Canada's capital markets to a two-business-day (T+2) settlement cycle from a three-business-day (T+3) cycle, the Canadian Capital Markets Association (CCMA) announced Friday.

CCMA helped orchestrate the shift to a shorter settlement cycle for Canadian markets alongside the same change in the United States.

T+2 was formally implemented on Sept. 5 in both Canada and the U.S. The first trades that were executed in the T+2 environment settled Thursday, Sept. 7.

"Managing this cutover so smoothly, while Canada's capital markets industry continued to operate without downtime, is a testament to the people working in many different areas of our capital markets across the country over the past two years, and right through this past Labour-Day weekend," says Keith Evans, executive director CCMA, in a statement.

The move to T+2 is expected to help reduce overall systemic risk, enhance capital efficiency, and ultimately reduce costs, by lowering settlement risk.

"There is an old saying in the securities industry that ‘nothing good happens between trade date and settlement date.' Competitors working together have just accomplished a one-third reduction in this time period," adds Evans. "This lowers risk and speeds up the time within which buyers will get their securities and sellers will get their money. The initiative also reduces risk in the overall system."

Read: SEC bulletin educates investors on T+2