(July 28 – 12:10 ET) – Compressing the trade settlement cycle from the current three days (T+3) to one (T+1) will cost US$8 billion and take until 2004 to complete, says a new study from the Securities Industry Association.
The study, prepared by Andersen Consulting and The Capital Markets Co., says that ultimately the move will enhance the efficiency and effectiveness of the U.S. markets. The changeover, it says, may save the industry US$2.7 billion a year through the “redeployment of resources, improvements in the matching and settlement process, reduction in the need for physical certificates, and improved methods for the delivery of prospectuses.”
Firms will begin to see the initial benefits of T+1 by the first quarter of 2003, the study says, and it will then take a further three years for the industry to break even.
The study is based on interviews with industry executives from 56 firms, representing both retail and institutional brokers and dealers, custodians, and asset managers.
-IE Staff