Financial Institution Letters
July 26, 2017
Securities and Exchange Commission Rule Amended to Shorten the Securities Transaction Settlement Cycle
The Federal Deposit Insurance Corporation (FDIC) is issuing this announcement to highlight actions that banks should take to prepare for the change in the Securities Exchange Commission's (SEC) rule governing the securities settlement cycle for securities transactions conducted by most broker-dealers. The effective date for the change is September 5, 2017.
Statement of Applicability to Institutions with Total Assets under $1 Billion: This Financial Institution Letter applies to all FDIC-supervised financial institutions.
- Following an amendment to the SEC's Securities Transaction Settlement Cycle Rule 15c6-1, effective September 5, 2017, the industry settlement cycle for transactions involving many U.S. securities, including equities, corporate and municipal bonds, unit investment trusts, and financial instruments composed of these products, will be shortened from the third business day after the trade date (T+3) to the second business day after the trade date (T+2).
- FDIC-supervised institutions should prepare to meet the new T+2 settlement time period for trades related to banks' securities activities that include banks' investment and trading portfolios and securities settlement and servicing provided to banks' custody and fiduciary accounts.
- For many FDIC-supervised institutions, the majority of the changes needed to implement T+2 will be completed by third party industry custodians, systems and service providers, broker-dealers, through which institutions trade for themselves or on behalf of their fiduciary and custody accounts, and broker-dealers providing retail securities brokerage services to institution customers. For guidance on assessing and managing risks associated with third-party relationships, institutions should refer to FDIC FIL-44-2008, "Guidance for Managing Third Party Risk."
- FDIC-Supervised Institutions (Commercial and Savings)
- Chief Executive Officer
- Chief Compliance Officer
- Trust Officer
- FDIC Announcement to Highlight Actions that Banks Should Take to Prepare for the Shortening of the Securities Transaction Settlement Cycle
- SEC Regulations Regarding Shortening the Securities Transaction Settlement Cycle
- FDIC FIL-44-2008, "Guidance for Managing Third Party Risk."
- Michael W. Orange, Senior Examination Specialist-Trust, MOrange@fdic.gov or (678) 916-2289
FDIC Financial Institution Letters (FILs) may be accessed from the FDIC's website at https://www.fdic.gov/news/news/financial/2017/.
To receive FILs electronically, please visit https://service.govdelivery.com/accounts/USFDIC/subscriber/new.
Paper copies may be obtained through the FDIC's Public Information Center, 3501 Fairfax Drive, E 1002, Arlington, VA 22226 (877-275-3342 or 703-562-2200).