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As John noted last week, the new T+1 settlement cycle commenced last Tuesday and we did not end up in any sort of post-Y2K dystopian world. In fact, the move to T+1 settlement appeared to go smoothly. On Thursday, DTCC issued a statement noting:

Our analysis shows that as of yesterday, May 29, 94.55% of transactions were affirmed by the Depository Trust Company (DTC) cutoff time of 9:00PM ET on trade date. This represents a significant change from the affirmation rate observed at the end of January (73%).

When considering specific market segments as of end of day on May 29:

– Prime Broker Affirmation Rate: 98.6% (up from 81% in January)

– Investment Manager Auto Affirmation (central match) Rate: 97.5% (up from 92% in January)

– Custodian or Investment Manager (self) Affirmation Rate: 84.29% (up from 51% in January)

Statement from Brian Steele, Managing Director, President, Clearing & Securities Services: “After working closely with the industry for over three years, we are pleased these efforts are driving a smooth transition, including very high same day affirmation rates, which increased to 94.55% yesterday. While we are proud of this progress, we will continue to collaborate with SIFMA, ICI and the industry to ensure a successful T+1 implementation in the coming days and weeks.”

On Friday, the Investment Company Institute, SIFMA and DTCC issued a joint statement noting:

“With the U.S. T+1 settlement cycle for corporate bonds, municipal bonds, and equities transactions now in place, ICI, SIFMA, and DTCC thank all the stakeholders for their collaboration and support in successfully implementing this historic change to U.S. markets. There was a tremendous amount of partnership and hard work to make T+1 a reality.

“Early indications following T+1 implementation are positive, and we look forward to working closely with firms and key stakeholders in the coming weeks to monitor and address any issues that may arise.

“Shortening the settlement cycle to T+1 promises to deliver greater operational efficiencies and substantially lower margin requirements while reducing risk in the financial system. With T+1 now live, we’ve collectively begun to achieve those benefits together.”

For practitioners, the new T+1 settlement cycle will require some getting used to, as timelines for preparing closing documents and filing final prospectuses and prospectus supplements is accelerated.

– Dave Lynn