The Canadian Securities Administrators (CSA) announces adoption of amendments to National Instrument 24-101 Institutional Trade Matching & Settlement reflecting the upcoming shortening of the standard settlement cycle from T+2 to T+1.
Introduction:
The Canadian Securities Administrators (the CSA or we) are adopting amendments to National Instrument 24-101 Institutional Trade Matching and Settlement and changes to Companion Policy 24-101 Institutional Trade Matching and Settlement, together referred to as the Amendments. The Instrument and the Companion Policy are collectively referred to as NI 24-101.
Provided all necessary Ministerial approvals are obtained, the Amendments will come into force on May 27, 2024 in all CSA jurisdictions.
The text of the Amendments is published with this Notice and is also available on the websites of the following CSA jurisdictions:
www.bcsc.bc.ca
www.albertasecurities.com
www.fcaa.gov.sk.ca
www.mbsecurities.ca
www.osc.ca
www.lautorite.qc.ca
www.fcnb.ca
nssc.novascotia.ca
Background:
NI 24-101 came into force in 2007 and was intended to encourage more efficient and timely pre-settlement confirmation, affirmation, trade allocation and settlement instructions processes for institutional trades in Canada, through a process known as institutional trade matching (ITM).
The CSA published proposed amendments to NI 24-101 (Proposed Amendments) for a 90-day comment period on December 15, 2022 in preparation for the migration to a shorter settlement cycle in 2024 at the same time as the industry in the United States.
Substance and Purpose:
We are making the Amendments for two reasons. First, the Amendments reflect the upcoming shortening of the standard settlement cycle for equity and long-term debt market trades in Canada from two days after the date of a trade (T+2) to one day after the date of a trade (T+1). The move to a T+1 settlement cycle in Canada will occur on May 27, 2024, the same day the Amendments come into force. This timing was chosen to align with the move to T+1 and associated regulatory rule changes in the United States. Because of a statutory holiday in the United States, the Canadian changeover and rule changes will occur one day earlier than those made by U.S. markets and regulators.
The rule changes to support the change to T+1 are as follows:
• Changing references to T+2 to T+1;
• Changing the ITM deadline; and
• Changing the times for some of the data reporting requirements in two forms applicable to clearing agencies and matching service utilities, respectively.
The second purpose of the Amendments is to permanently repeal the exception reporting requirements in Part 4 of the Instrument, including the requirement to file Form 24-101F1 Registered Firm Exception Reporting of DAP/RAP Trade Reporting and Matching (Form 24-101F1). Form 24-101F1 has been subject to a reporting requirement since 2020.
In addition to these changes, we have added a reference to cyber resilience in connection with the assessments matching service utilities must undertake for core systems. We have also corrected a few minor typographical errors.
Comments Received:
In response to the Proposed Amendments, we received submissions from 4 commenters. We have considered the comments received and thank all of the commenters for their input. A list of those who submitted comments and a summary of the comments and our responses are attached to this Notice at Annexes C and D respectively. Copies of the comment letters are available at www.osc.gov.on.ca.
Summary of Changes Since Publication for Comment:
After considering the written comments received, we have changed the ITM deadline in the Proposed Amendments (9 p.m. on T) to 3:59 a.m. on T+1. We have also made additional changes to the data reporting requirements applicable to clearing agencies and matching service utilities. One of these data reporting changes reflects a further comment submitted by one of the original commenters. The additional comment letter is also available at www.osc.gov.on.ca. In the interest of fairness, the other commenters were given the opportunity to respond to this letter, but none chose to do so.
Effective date:
Comes into force on May 27, 2024.
TLDRS:
- The Canadian Securities Administrators (CSA) are adopting amendments to National Instrument 24-101 Institutional Trade Matching and Settlement (NI 24-101) and changes to its Companion Policy, collectively referred to as the Amendments, effective May 27, 2024.
- The Amendments aim to support the transition to a shorter standard settlement cycle for equity and long-term debt market trades in Canada, moving from two days after a trade (T+2) to one day after a trade (T+1).
- This change to a T+1 settlement cycle is synchronized with similar regulatory changes here in the United States, although due to a U.S. statutory holiday, the Canadian changeover will occur one day earlier.
- The rule changes include modifying references from T+2 to T+1, changing the institutional trade matching (ITM) deadline, and adjusting data reporting requirements for clearing agencies and matching service utilities.
- The Amendments also permanently repeal the exception reporting requirements in Part 4 of the Instrument, including the requirement to file Form 24-101F1 (Registered Firm Exception Reporting of DAP/RAP Trade Reporting and Matching).
- A reference to cyber resilience has been added in relation to assessments that matching service utilities must conduct for core systems. Minor typographical errors have also been corrected.
- Following comments from four submissions during the consultation process, changes were made to the ITM deadline, now set for 3:59 a.m. on T+1, and further adjustments to data reporting requirements.
