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CHAPTER TEN | A BRIGHT FUTURE
unusually high volume of trading activity stressed the financial system. While DTCC typically handles about 120 million transactions a day, COVID-19 spiked that to nearly double. During the meme stock event, DTCC peaked at 475 million transactions in a single day. “Our IT people know they must have the capacity to handle peak volumes like this,” said Michael Bodson, who was president and CEO at the time. “They understand what can go wrong and how to manage the surges. They plan for it and they react to it, and the firm performs flawlessly.” Successfully handling the high volume of trades during the event would serve as a prime example of DTCC efficiently working to provide stability and certainty during market shocks.
Accelerating Settlement Yet Again
While the meme stock market event brought renewed focus on settlement times, DTCC had already started to lay the groundwork to further accelerate settlement in the securities markets soon after the industry transition to T+2 in 2017. The firm issued a white paper the following year, which focused on opportunities to modernize the post-trade infrastructure underpinning the US equity markets, including ways to enhance clearing and settlement processing efficiency to promote settlement finality. Building on the success of that effort, DTCC set in motion plans to move to T+1, or trade date plus one day. It began a series of meetings with industry stakeholders in 2020, using that feedback as the basis for a new white paper published in early 2021 outlining steps to achieve T+1. Soon after, the firm engaged with the Securities Industry and Financial Markets Association (SIFMA) and the Investment Company Institute (ICI)—the three organizations led on the move to T+2—to further galvanize industry support. “The benefits of a T+1 cycle are clear,” said Murray Pozmanter, former managing director, president of DTCC Clearing Agency Services and head of Global Business Operations. “It will mitigate risk, particularly during periods of high volume and volatility, reduce costs and liquidity requirements, modernize infrastructure and standardize industry processes.” With support for accelerating settlement gaining momentum, a steering committee and industry working group were formed to develop consensus for the transition, evaluate potential risks or impacts and develop an implementation approach. The organizations also worked closely with the US Securities and Exchange Commission, which has since called for implementation of the shortened settlement cycle in 2024.
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