CSA and SEC move forward towards T+1
On December 15, the CSA published a notice and request for comment on proposed rules to support the transition from a two-day trade settlement cycle for equity and long-term debt market trades in Canada to one day (T+1) to align with changes to the US settlement cycle expected to occur in 2024. The move to T+1 is intended to reduce settlement risk and enhance investor protection, while also enhancing operational and capital efficiency.
Concurrently, the CSA published a Notice indicating that while secondary market trading in ETFs will also move to settle on T+1, the CSA is not proposing to shorten the settlement cycle for distributions and redemptions of mutual fund securities at this time. The notice indicates that where feasible, mutual funds should settle on T+1 voluntarily but that funds need the flexibility to determine if a T+1 cycle can work for them, particularly for mutual funds with significant holdings of securities in jurisdictions with longer settlement cycles (i.e. Europe and Asia).
On February 15, the SEC adopted a final rule to shorten the settlement cycle from the current trade date plus two business days (T+2) to T+1. The SEC has opted to have the new rule take effect on May 28, 2024. The Canadian Capital Markets Association (CCMA) issued a news release announcing that Monday, May 27, 2024 was selected as the date on which Canada will implement transitioning to T+1.
Mackenzie is currently an active participant in various industry working groups on T+1 changes and how they impact the financial industry in Canada. We are closely monitoring the guidance from regulators and anticipating transitioning to T+1 within 2024 for our qualifying funds.
CSA Notice and Request for Comment – Proposed Amendments to National Instrument 24-101 Institutional Trade Matching and Settlement and Proposed Changes to Companion Policy 24-101 Institutional Trade Matching and Settlement (osc.ca)