DTCC Announces Timetable for First Phase of Settlement Optimization

The DTCC announced a timetable for the first phase of settlement optimization, a significant enhancement aimed at removing an entire market day of settlement exposure without eliminating a calendar day from the standard trade settlement process. Based on the support and feedback from the Settlement Optimization Working Group, DTCC is taking a phased approach to the implementation of Settlement Optimization, beginning with Night Cycle Re-engineering. By focusing initially on re-engineering, the night cycle, a processing batch occurring in the overnight hours, DTCC seeks to significantly increase settlement rates going into the next morning. The current algorithm results in a night cycle settlement rate of about 45% for all transactions during that period; however, DTCC estimates it can increase that same settlement rate to as high as 90% as a result of the re-engineering. This increase in settlement during the night cycle is a prerequisite for the Working Group to explore the implementation of Settlement Optimization Phase 2, the introduction of morning settlement in addition to today’s end-of-day settlement process. By moving from the afternoon of the settlement date to the morning before market open, the risk associated with funds settlement will be reduced. The launch of Night Cycle Re-engineering is subject to regulatory approval, as are the additional phases that will be addressed over time.