Canadian Securities Regulators Adopt New Rules to Reduce Settlement Cycle
The Canadian Securities Administrators (CSA) announced today the adoption of final amendments to allow investment funds to voluntarily shorten their settlement cycle from two days to one day after the trade. This move aligns with the evolving North American securities markets, which will be transitioning to this settlement cycle later this month.
The new rules give investment funds the option to choose between different settlement cycles, including the ability to settle trades one day after execution. Changes include clarifications on transaction payment dates and a reduction in the timeframe for forced redemption of securities in case of non-payment, which is shortened from three to two days after the pricing date for funds opting for the one-day settlement cycle.
The CSA notice, including the amendments to National Instrument 81-102 Investment Funds and Companion Policy 81-102CP, can be found on the websites of the relevant CSA members.
Benefits of Shortening the Settlement Cycle for Investment Funds
Shortening the settlement cycle for investment funds can bring several benefits to market participants. By reducing the time it takes to settle trades, investors can access their funds sooner, improving liquidity in the market. This change also aligns Canadian securities regulations with international standards, making the market more attractive to foreign investors.
Considerations for Investment Funds When Choosing a Settlement Cycle
When deciding on a settlement cycle, investment funds should carefully consider their operational capabilities and the impact on their investors. While a one-day settlement cycle offers the advantage of quicker access to funds, it may require adjustments to internal processes and systems. Funds should also assess the potential risks and benefits of different settlement cycles to determine the most suitable option for their investment strategy.
In conclusion, the adoption of new rules by the Canadian Securities Administrators to reduce the settlement cycle for investment funds reflects the ongoing efforts to enhance market efficiency and align with international best practices. By giving funds the flexibility to choose their settlement cycle, regulators aim to promote a more competitive and investor-friendly market environment.