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.
What this means for investors is that, when they buy stocks, long-term bonds, mutual funds and certain other products, they’ll pay for these securities a day earlier. Investors selling or redeeming these investments will be paid a day sooner. This reduces risks of non-payment and improves efficiency.
Many retail investors with money or securities in their accounts 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 advisors.
At present, the actual exchange of most securities transactions for cash takes place three business days after a trade. 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 their timetables already.
While moving toward T+2 settlement, milestones included necessary regulatory changes, as well successful testing of system changes required to eliminate one day from the current three-day cycle.
In a release, Keith Evans, executive director of the Canadian Capital Markets Association, says, “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.”
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