T+2 settlement prompts proposed amendments to NI 24-101 and publication of consultation paper

August 19, 2016

The migration to a standard T+2 settlement cycle on September 5, 2017 is part of the impetus for amendments proposed by the Canadian Securities Administrators (CSA) to National Instrument 24-101 Institutional Trade Matching and Settlement (NI 24-101) and Companion Policy 24-101 Institutional Trade Matching and Settlement.  In addition to these proposed amendments, the CSA has published CSA Consultation Paper 24-402 Policy Considerations for Enhancing Settlement Discipline in a T+2 Settlement Cycle Environment(Consultation Paper 24-402).

While NI 24-101 does not mandate T+3 settlement and does not prevent T+2 settlement, the proposed amendments are intended to facilitate the move to a T+2 settlement cycle.  They are also intended to reform NI 24-101 to reflect developments that have occurred since it came into force in 2007 (such as the rise in ETF trading) and to revise the requirements applicable to matching service utility systems and business continuity planning.

Consultation Paper 24-402 summarizes settlement discipline procedures in Canada and queries how the risk of increased settlement failures following the transition to a standard T+2 settlement cycle can be mitigated.  The CSA is specifically seeking comments on whether additional settlement discipline procedures may be required, including additional amendments to NI 24-101,  and whether other mechanisms of settlement discipline would minimize settlement failures.

The CSA is accepting comments on the proposed changes until November 16, 2016. The final amendments are intended to be adopted as of September 5, 2017, which is when the move to a T+2 settlement cycle is expected to occur in Canada and the United States.

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