DJN: WSJ(7/22) SIA Puts Off Next-Day Trade Settlement Goal
(Dow Jones 07/21 20:12:01)
By Gaston F. Ceron
Dow Jones Newswires
NEW YORK -- Wall Street stepped away from its goal of switching to next-day
settlement of stock trades by 2005, instead opting to focus on a more
gradual improvement of the trading process.
Next-day settlement, or "T+1," would have been a departure from the current
three-day settlement process for trades. But with brokerage houses reeling
from a business slowdown and without a clear consensus on how to proceed to
T+1, securities firms will now put aside the 2005 target.
The Securities Industry Association's board approved a plan last week under
which firms will work on meeting "straight-through processing" goals over
the next two years. This term refers to the "integration of systems and
processes to automate the trade process from end-to-end trade execution,
confirmation and settlement without manual intervention or data entry," the
SIA said.
The SIA's plan, which the trade group will spell out further at a conference
in October, would put off a decision on T+1. "We believe that the settlement
period should be evaluated again in 2004," said Allen Morgan, chairman of
the SIA and chairman and chief executive of Morgan Keegan, a brokerage unit
of Regions Financial Corp.
One question hanging over Wall Street's plans to put off T+1 is what the
Securities and Exchange Commission has in mind. SEC Chairman Harvey Pitt
said in an April speech that the agency is preparing to unveil a rule
proposal on moving to T+1. In May, Robert Colby, deputy director of the
SEC's division of market regulation, said such a plan may be made public
this summer so that comments to it may be made.
A spokesman for the SEC declined to comment directly on the SIA's action but
said Mr. Pitt's earlier statement still stands.
There is always the possibility that the SEC may order Wall Street to move
to T+1. But SIA Executive Vice President Donald Kittell said the SEC's
comment process is likely to find that there is no broad consensus among
interested parties on T+1. The SEC, Mr. Kittell said, "is aware of what
we're doing."
As for the reasons for putting aside the 2005 target date, which itself was
pushed back from an earlier goal of 2004, Mr. Kittell said that overhauling
the trading process "is much more complex than what we thought in the
beginning" and that a more measured approach therefore made better sense.
It is also true that Wall Street is facing a markedly different environment
now than when plans for T+1 were floated three years ago. The trading
infrastructure arguably isn't under the same stress as it was during the
market's headier days. Mr. Kittell said that for Wall Street firms,
budgetary issues are "a factor as well."
(END) DOW JONES NEWS 07-21-02 |
