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The push towards shorter settlement cycles gained momentum after the 2008 financial crisis , however the varying speeds of global markets in transitioning has left even the most clued-up securities services professionals unsure of where individual countries are at . The shortening of the settlement cycle and global harmonisation is aimed at reducing credit and counterparty risk , while benefits include operational process improvements , cash deployment efficiencies , increased market liquidity and lower collateral requirements . Europe ’ s transition has been well documented , with the move beginning in October 2014 , however its own yardstick in market infrastructure progress – the US – took three more years . The Shortened Settlement Cycle Industry Steering Committee in the US was formed in 2014 to explore how to facilitate the US settlement cycle . Industry requirements around trade processing , asset servicing , documentation and regulatory changes were outlined . At the time , consultants warned the industry was unprepared even as the SEC moved to finalise the implementation date earlier this year . “ Conferences were held , white papers were written and webinars hosted ,” said Ryan Burns , head of North America relationship management at Northern Trust Global Fund Services , T + 2 arrived with barely a ripple : the US market had successfully executed a shortened settlement cycle .” Adopting a T + 2 settlement cycle alongside the US were Canada , Mexico , Peru and Argentina , while the Saudi Arabian Stock Exchange also transitioned in 2017 . Australia and New Zealand moved to T + 2 in 2016 , however none of these countries have had as big of an impact as the US , according to industry experts .
Landmark move “ Given the sheer size of the US market , not only did the development signify a tectonic shift toward the global harmonisation of settlement cycles to T + 2 , it also meant that due to the amount of cross-border investment into the US , the full impact and benefit of T + 2 can finally be felt globally ,” wrote Tony Freeman , global head of industry relations at the DTCC , for Global Custodian . As T + 2 continues to sweep across the globe and becomes the standard in major markets , East Asia remains a laggard and a counterintuitive patchwork in the leap towards shorter settlement cycles . It ’ s of little surprise that the stock exchange of Hong Kong and the Korea Exchange ( KRX ) are already there , but the Singapore Exchange ( SGX ) and the Tokyo Stock Exchange ( TSE ), major regional , if not global , leaders are not . Most odd is the fact that the Stock Exchange of Thailand made the move in March 2018 , ahead of players usually considered far more advanced .
“ The T + 2 project has been on our minds , and we have been working on it for 18 months ,” says Pataravasee Suvarnsorn , executive vice president of the Stock Exchange of Thailand ( SET ) and managing director Thailand Clearing House . Hong Kong Exchanges and Clearing Limited ( HKEx ) made the switch with little fanfare in 2011 . With the exception of small brokers , who favoured the existing system and viewed the shorter cycle as putting them at a competitive disadvantage , the move was widely supported . The KRX has been T + 2 since at least 2000 , and for a time it considered taking the cycle down to T + 1 . The Bombay Stock Exchange ( BSE ) and Taiwan Stock Exchange ( TWSE ) made the shift to T + 2 in 2003 and 2009 respectively .
“ T + 2 has been in the works for some time . It is all part of our post-trade modernisation programme .”
NICO TORCHETTI , SENIOR VICE PRESIDENT , HEAD OF MARKET SERVICES , SGX
Patchwork approach Globally , the push towards shorter settlement cycles gained momentum after the 2008 financial crisis , with Europe going first followed by the US last year . In contrast , Asia ’ s experience has been far less coordinated which , in part , is a function of the region ’ s diversity . Asian markets range from the Yangon Stock Exchange ( YSE ), with five listings , and the Lao Securities Exchange ( LSX ), with six , to the Tokyo Stock Exchange ( TSE ), with 2,600 in the First Section alone . In between are markets at varying degrees of development in terms of systems , infrastructure and investor profile . Even within the Association of Southeast Asian Nations ( ASEAN ) pushing for market harmonisation and eventual seamless regional trading , no consensus exists on post-trade architecture . The markets can at times be more competitive than cooperative , while some are held back by domestic legal systems and the interests of their local brokerages . At least two exchanges in the region considered going to T + 2 in the past but abandoned the efforts . The SET was ready for the transition in 2005 , with an actual target date set ( 1 June ) and discussions initiated with related institutions , such as the Bank of Thailand . The SGX planned to move to T + 2 in 2014 , but backed off due to resistance from the market as investors were still unprepared
18 Global Custodian Summer 2018