Investment Company Institute Endorses T+2

The Investment Company Institute (ICI) in the U.S. has endorsed an industry initiative to shorten settlement cycles for a range of securities to T+2.
By Janet Du Chenne(59204)
The Investment Company Institute (ICI) in the U.S. has endorsed an industry initiative to shorten settlement cycles for a range of securities to T+2.

Equity trades clearing through DTCC, which is leading the initiative, generally settle on T+3, while most mutual fund trades settle on T+1. The ICI believes the voluntary move to a T+2 settlement cycle for securities currently settling at T+3 or longer would result in a meaningful reduction in systemic, liquidity, and operational risks; would promote better use of capital; and would create significant process efficiencies for market participants—all changes that would benefit investors.

“The fund industry supports practical efforts to address specific activities, improve market practices, and thereby mitigate risks in the financial markets,” ICI president and CEO Paul Schott Stevens said. “Shortening U.S. settlement cycles on a time frame that is workable for all market participants would be a positive step toward sounder markets and would align the U.S. with initiatives in global markets.”

“DTCC commends ICI for the support, attention, and efforts it is giving to this important industry issue and for its commitment to improving the resiliency of the markets and all participants,” said Michael Bodson, president and CEO of DTCC. “Shortening the settlement cycle in the U.S. will promote systemic risk reduction and capital efficiency in the marketplace and strengthen our financial system. We are committed to working with ICI and the broader financial community to encourage further dialogue and gain consensus on the best way to move forward on this transformational initiative for our industry.”

The change also would reduce disparities in settlement between fund shares and their underlying portfolio securities.

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