As the Canadian securities industry prepares for the move to a shorter settlement cycle in the fall of 2017, securities regulators are contemplating rule changes to facilitate the transition.
The Canadian Securities Administrators (CSA) on Thursday published proposed amendments to National Instrument 24-101 Institutional Trade Matching and Settlement in addition to CSA Consultation Paper 24-402 Policy Considerations for Enhancing Settlement Discipline in a T+2 Settlement Cycle Environment. The comment period is open until Nov. 16.
The amendments are being proposed as part of the Canadian securities industry’s plans to shorten the standard settlement cycle for trades from three days after a trade (T+3) to two days after a trade (T+2). The transition to T+2 will occur on Sept. 5, 2017, the same date the markets in the United States are planning to move to a T+2 settlement cycle.
“A shorter settlement cycle is expected to mitigate risk in securities clearing and settlement by reducing counterparty exposure between the parties to a trade,” says Louis Morisset, chairman of the CSA and chairman and CEO of the Autorité des marchés financiers (AMF), in a statement.
The proposed rule amendments will facilitate the transition to a shorter settlement cycle, and, at the same time, the industry’s T+2 initiatives “are expected to consider operational improvements to manage settlement risk in the move to T+2,” the CSA says in a statement.
To that end, the CSA is also seeking comment on whether the current settlement discipline regime will be adequate for a T+2 cycle, or if improvements would make the transition to T+2 easier. Any rule proposals to enhance the settlement discipline regime would have to go through the ordinary rule making and public comment process, the CSA says.
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