The US Securities and Exchange Commission (SEC) has issued a Risk Alert, imploring market participants to ensure they are ready for the transition to T+1 on 28 May 2024.
The standard settlement cycle for most broker-dealer transactions in the US will shorten from two business days after the trade date to one business day after the trade date. This is also the compliance date for new rules related to the processing of institutional trades by broker-dealers and certain clearing agencies, as well as certain recordkeeping amendments applicable to registered investment advisers.
The regulator’s division of examinations said it is “critical” firms prepare for, and understand the impacts of, T+1 and the new rules to manage the transition.
As well as shortening the settlement cycle, market participants face a rule amendment that addresses the need for broker-dealers and customers to complete allocations, confirmations, and affirmations (ACA) by the end of the trade date.
Additionally, clearing agencies that are central matching service providers (CMSPs) must set up policies that facilitate straight-through processing and submit an annual progress report to the SEC on straight-through processing.
Lastly, amendments to the Advisers Act will require investment advisers to keep records for any transaction subject to broker-dealer recordkeeping Rule 15c6-2(a), including each confirmation received, and any allocation and each affirmation sent or received, with a date and time stamp for each.
James Pike, head of business development, at Taskize, said: “A reliance on manually affirming trades filters up the chain to more manual processing for the settlement of the trade. For the custodians, they will be inundated with queries from their asset management clients to confirm the status of the trade matching and settlement when they should be in a position to do so automatically. Custodians will require significant operational capacity to find the required information and then communicate this to their client over email, when it could be automated in the first place.”
©Markets Media Europe 2024
