Hudson Depository and Clearing supports plan to shorten settlement cycle

PROVIDENCIALES, Turks and Caicos Islands, 20 October 2012 –PR.com)– Interest in shortening settlement cycles has increased since the European Commission reported in early 2011 that a unified settlement cycle is needed in the EU. In the draft, securities legislation calls for a unified T+2 settlement cycle across Europe. Most European markets settle on T+3, but Germany is a notable exception, settling on T+2.

The settlement cycle is in stark contrast to other markets and regions around the world. With the improvement of computerization, the settlement cycle was shortened from T+5 in 1995 to the current T+3.

Since then, the industry has considered shortening transaction cycles twice. Once in 2000, the Securities Industry Association (the predecessor of the Securities Industry and Financial Markets Association) proposed it. Four years later, the U.S. Securities and Exchange Commission also tried to shorten transaction cycles, but later decided that the technology needed to shorten transaction cycles did not exist.

Last year, the value of all U.S. stock and bond trades settled on a T+3 basis averaged nearly $448 billion per day. Shortening trading times will reduce costs and risks for financial institutions involved in trading, including clearing houses and transfer agents.

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