FDIC urges firms to plan for T+2

Project plan priorities highlighted for firms getting reading for US move to T+2.

By John Bakie

US financial market participants have been told to establish project plans to implement the country’s shift to T+2 on 5 September.

In a letter issued by the Federal Deposit Insurance Corporation (FDIC), key issues including client communications, oversight of third parties and training should all be major priorities for firms as implementation approaches.

The letter said affected firms should: “determine what system and process changes or outreach may be needed for a smooth transition to T+2. Institution management should establish and follow an appropriate project plan for implementation.”

A list of key issues to consider includes changes to operational procedures for securities clearance and settlement, new client agreements and disclosures, oversight of third party implementation of T+2 and training employees who work in securities clearing and settlement functions.

It added that firms will need a heightened focus on risk management and surveillance systems to identify and address any potential increase in failed trades or processing exceptions.

The move to T+2 from the current T+3 settlement cycle will bring the US markets into alignment with most other major developed markets which already have a two-day settlement cycle. The European Union transitioned to T+2 in 2015.