time's up
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With about nine months left until the securities industry moves to shorten the settlement cycle, the industry is welcoming the Canadian Securities Administrators’ (CSA) move to shift the proposed trade-matching deadline.

In a staff notice, the CSA said it will push back the trade-matching deadline that’s set out in proposed rule changes from 9 p.m. Eastern time on the day of the trade to 3:59 a.m. Eastern on the day after the trade.

The move comes in response to industry feedback regarding the rule changes being adopted to facilitate the industry’s move to T+1 settlement from T+2.

The CSA noted the industry trade group leading the effort to shorten the settlement cycle, the Canadian Capital Markets Association (CCMA), had “expressed concerns about the trade matching deadline” contained in the CSA’s initial proposals.

The regulators decided to support the industry’s position on the deadline issue and have informed the industry accordingly, as the CCMA wanted to know the trade-matching deadline “as soon as possible in order to make the necessary preparations, including [IT] systems changes and testing, for the T+1 transition.”

In response, the CCMA welcomed the CSA’s decision.

“The CSA’s announcement means industry participants can proceed more confidently with major development projects to make next-day settlement a reality,” said Keith Evans, executive director of the CCMA, in a release.

Pushing back the trade-matching deadline will give firms more time to confirm trade details with trading partners that operate in European and Asian time zones, thereby reducing counterparty risk and improving collateral efficiency for dealers, Evans noted.

“This reduces the system risks of transition from T+2 to T+1 and mitigates an increase in failed trades,” he said. “Providing certainty at this time should help smooth the Canadian investment industry’s migration to a shorter securities settlement cycle next year.”

The CSA said its proposed rule changes are expected to come into effect in time to allow the Canadian securities industry to move to a T+1 settlement cycle on May 27, 2024.