The Securities Industry Association reaffirmed its support of the Security and Exchange Commission’s efforts to improve the safety and operational efficiency of the US clearance and settlement system.
By achieving the goal of straight-through processing–the automation of the trade process from execution to settlement–the SIA believes that investors and the industry will receive the benefits of risk reduction, streamlined and efficient processing, improved functionality and service, greater capacity, and cost efficiencies.
Jeffrey Bernstein, chairman of the SIA’s STP Steering Committee and a senior managing director at Bear Stearns and Co., stated that the industry should focus on achieving STP, and added that shortening the settlement cycle should not be considered at this time because many of the steps necessary to implement a shortened settlement cycle are not yet in place.
However, the STP projects already in progress will mitigate risk in the clearance and settlement process, one of the key incentives to shortening the time it takes to complete the cycle. The task force responsible for drafting the response urged the commission to work with the industry to facilitate STP and achieve the goals of same-day affirmation/matching, elimination of physical certificates, and other STP milestones.
The SIA also called on the SEC to encourage issuers to use the Direct Registration System and to support other industry initiatives to eliminate physical certificates. In detailing the benefits to investors, issuers, and transfer agents of book-entry ownership, the association called for the SEC to support efforts to educate sales professionals and investors about these benefits and to strongly encourage state securities regulators to change state laws that inhibit use of electronic book entry of stock ownership (dematerialization).
The SIA said it strongly supports same day affirmation/matching and believes that this should be implemented in phases. However, it said a commission rule may be necessary to accomplish this goal.
The letter also outlined SIA’s extensive efforts to help the industry achieve STP, including an educational program directed towards investors and issuers about the benefits of book-entry registration. In March, the SIA’s board of directors endorsed a continuation of the association’s STP projects and the establishment of an executive team to plan and prioritize industry-wide technical and operations projects through 2010.
Members of the task force that drafted the letter were drawn from relevant STP subcommittees, the SIA said.