TORONTO, May 29, 2017 – The Canadian Capital Markets Association (CCMA) announced today that fewer than 100 days remain until Canada’s financial markets move to shorten the time between when a securities transaction is made, and when the related securities and cash are exchanged. With the introduction of “T+2” settlement effective September 5, 2017, both Canada and the U.S. plan to shorten their securities settlement periods to two days from three.
“Investors in Canada rightly expect our market infrastructure to function effectively, reliably and smoothly as they trade in our markets, and this change is designed to further strengthen our financial marketplace,” said Keith Evans, CCMA’s Executive Director. “I applaud the efforts of the competing firms in Canada’s investment industry that have come together over the past two years to successfully implement internal systems and process changes necessary to move to a two-day timetable for cash and securities along with our American counterparts.” At present, the actual exchange of most securities transactions for cash takes place three business days after a trade.
Evans thanked members of the Canadian Securities Administrators (CSA), an umbrella group of provincial and territorial securities regulators, for working to support a smooth transition to the shorter cycle by finalizing rule changes and providing clear guidance. Milestones included necessary regulatory changes, as well successful testing of the system changes required to eliminate one day from the current three-day cycle.
Evans also pointed to successful testing by investment industry firms, in particular, the largest securities infrastructure organizations – the Canadian Depository for Securities, Canadian Derivatives Clearing Corporation (both TMX subsidiaries), and Fundserv, as well as the U.S.’s Depository Trust and Clearing Corporation – that provide the critical links between the many parts of the investment industry. Given highly integrated markets and many securities interlisted on both Canadian and U.S. exchanges, having the two countries on the same timetable will help make investing less complicated, less risky and more efficient.
From Europe to Australia, an array of markets have successfully shortened the securities-and-payment-processing timetable already, just as Canada and the U.S. will. What this means for those investors who buy stocks, long-term bonds, mutual funds and certain other products is that they will have to pay for these securities a day earlier than now, while investors selling or redeeming these investments will be paid a day sooner. This will reduce risks of non-payment and improve efficiency – good news for all.
Many retail investors, with money or securities in their account on the date a purchase, sale or redemption is made, will likely see no changes. But institutional investors will need to manage their cash management processes to ensure earlier payment. Likewise, retail investors who still deliver a cheque for payment, or bring in securities certificates to sell, may need to make new arrangements with their advisor, relationship manager or other contact.
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About the Canadian Capital Markets Association (CCMA)
The Canadian Capital Markets Association (CCMA) is a national, federally incorporated, not-for-profit organization, launched in 1999 to identify, analyze and recommend ways to meet the challenges and opportunities facing Canadian and international capital markets. The CCMA’s mandate is to communicate, educate and help co-ordinate the different segments of the investment industry on projects and initiatives spanning multiple parts of Canada’s capital markets. Participating under the co-ordinating umbrella of the CCMA are dealers, custodians, asset managers and industry associations; exchanges and securities infrastructure entities, including The Canadian Depository of Securities (CDS) and Fundserv; back-office service providers and vendors; and other stakeholders. More information is available at www.ccma-acmc.ca
About T+2
The term “T+2” refers to the number of business days between when a trade is executed – trade date or “T” – and the day it settles, that is, when the buyer’s payment for a securities trade is exchanged simultaneously with the securities of the seller. In 1995, Canada and the U.S. together shortened the standard settlement cycle for most debt, equity and mutual funds from to T+3 from T+5. The term T+2 also acts as short-hand for the current industry-wide project to shorten the maximum standard settlement cycle to T+2 from T+3 on September 5, 2017 in conjunction with U.S. capital markets.
The rule notices referenced as recently released are:
Final rule amendments to National Instrument (NI) 24-101, Institutional Trade Matching and Settlement and its companion policy and
A consultation document with interim guidance in the form of a Notice and Request for Comment: Adoption of a T+2 Settlement Cycle for Conventional Mutual Funds, along with proposed amendments to National Instrument 81-102, Investment Funds (NI 81-102).
For more information, please contact:
Keith Evans
Executive Director
Canadian Capital Markets Association
416.365.8594 / kevans@ccma-acmc.ca