CANADA: CDS Publishes White Paper on Moving to T+2 Settlement Cycle

Tuesday December 1 2015

Subsequent to the European Union moving to a T+2 settlements cycle in 2014, the United States announced in late 2014 that DTCC would similarly move to T+2. The Canadian Securities Administrators (CSA) determined that due to the interconnectedness of the Canadian and American markets, Canada must move in tandem with DTCC to a T+2 environment.

The projected implementation time frame is the third quarter of 2017.

Moving to T+2 offers the following key benefits to the Canadian market:

• Provide a uniform settlement period aligned with the U.S. for settling securities by T+2. 
• Reduce counterparty, market and liquidity risks by reducing both outstanding settlements and their associated replacement cost risks. 
• Increase automation of operational processes across organizations, including: 
• Dematerialization 
• Same-day affirmation (SDA)
• Alignment between linked markets
• Streamlined trade corrections 

CDS has conducted a requirements analysis for moving to a T+2 settlements environment. The impact on CDS systems, rules and internal/external procedures related to all functional areas was assessed.

The following summarizes the findings:

Impacts are mainly procedural on CDS trade processing and corporate action and entitlement functions, as CDS systems are driven by specified dates received from external sources and are not impacted by the length of the settlement period. Specifically, CDS systems are T+2 compatible, and are unaffected by a shortened settlement period as processes are based on trade date, value date, ex-date and due bill redemption date values as received from exchanges and service bureaus.
CDS’s Participant Rules, including those governing both domestic and cross-border transactions and activity, are drafted without reference to specific or particular timelines. Consequently, CDS does not anticipate the requirement for material amendments or modifications to the Participant Rules.

The exchanges and service bureaus should ensure that they are T+2 compliant and a comprehensive testing effort with CDS will be required to ensure that CDS receives the necessary data efficiently and reliably in a T+2 settlements environment.

CDS participants and/or their service bureaus who receive trade related output from CDS will require comprehensive testing with CDS to ensure their systems are T+2 compatible.

CDS will coordinate activities with stakeholders as part of the CCMA working groups to ensure a seamless transition to a T+2 settlements cycle.

Click on the link above for further details