The self-regulatory organization has set forth guidelines, test frameworks and a conference line to help the industry smooth its path to T+2.
Tests to facilitate the move by U.S. financial markets to a shorter settlement cycle will be sponsored by the Financial Industry Regulatory Authority (FINRA) on Saturday, August 19, 2017, according to the self-regulatory organization.
Underway for several years, the U.S. push for a shorter settlement cycle crossed a major milestone this past March when the SEC amended a key rule to shorten the standard settlement cycle for most broker-dealer securities transactions from three business days, known as T+3, to a settlement cycle of two business days or T+2.
The SEC action set the stage for industry-wide T+2 implementations starting in September of this year.
The major securities industry groups backing T+2 — the post-trade infrastructure provider DTCC, an association of regulated funds, the Investment Company Institute (ICI), Wall Street advocacy group the Securities Industry and Financial Markets Association (SIFMA) and the T+2 Industry Steering Committee (T+2 ISC) — have all applauded the SEC’s action.
Since March, industry participants have been revamping infrastructures to accommodate the shorter settlement times. In addition, some firms and industry groups have also been exploring blockchain/distributed ledger technology (DLT), which might in the future facilitate nearly immediate settlement.
“In accordance with the industry-led initiative to shorten the settlement cycle from three business days (T+3) to two business days (T+2), FINRA will sponsor the second of two production User Acceptance Tests (UAT),” according to a FINRA announcement. This test will allow clients to examine “the changes for T+2 Settlement for the Over-The-Counter Reporting Facility (ORF) and the Alternative Display Facility (ADF).”
FINRA officials say the UAT will start “at approximately 9 a.m. ET and end at approximately 12 p.m. ET.”
A conference line, (800) 519-4276, pass code: 8584438, “will be open for the duration of the test,” according to FINRA. “Due to a limited number of lines, firms should consider sharing the line if calling from the same location.”
Testing Details and Guidelines
Firms and service bureaus may use the “computer-to-computer interface (CTCI), Financial Information eXchange (FIX) protocols, and TRAQS Web browser to report transactions for the UAT. CTCI and FIX users will connect via their production circuits,” according to FINRA. “Equity trade reporting web users should use the production TRAQS URL: https://www.finratraqs.org.”
If industry participants want to take part in the tests, they should tell officials of FINRA Market Operations via an email message to FINRAOperations@finra.org , according to FINRA. “Please include the firm name, MPID(s) to be used, names of testers and web usernames, if applicable no later than noon on Thursday, August 17, 2017 in order to successfully register for the test,” FINRA adds.
Clearing Firms Welcome
“Clearing firms are invited to participate in the test to monitor their correspondents’ trade activity marked for clearing. Clearing firms may use the TRAQS Clearing Scan function,” according to FINRA.
In a side note, FINRA officials say that because the National Securities Clearing Corp. (NSCC) “cannot receive trades via its production connection on Saturdays, FINRA will submit the Saturday test’s clearing instructions through the FINRA-NSCC test connection to NSCC on Monday, August 21, 2017 with a Trade Date of August 21.”
Also, clearing firms will be able to reconcile trade activity on August 19 in ORF “against the Universal Trade Capture’s output from the NSCC’s test environment on Monday, August 21,” FINRA officials say. “Trades entered in the ADF and ORF test region (NTF) on Monday, August 21, 2017, will not be sent to the NSCC test region in order to keep the files separate from the Saturday production test trade activity.”