ICI Supports Efforts to Improve Clearance and Settlement System in U.S. Securities Markets

Washington, DC, June 18, 2004 - The Institute filed a comment letter strongly supporting the recent efforts to enhance efficiency and reduce risk in the operation of the U.S. clearance and settlement system, particularly SEC proposals contained in a recent concept release.

Background
The SEC's March 2004 concept release requests comment on methods to improve the safety and operational efficiency of the U.S. clearance and settlement system and to help the U.S. securities industry achieve straight-through processing (STP). Specifically, the SEC requests comment on:

ICI Position
In its comment letter, the Institute expresses support for the goal of establishing STP in the securities markets and its belief that a regulatory mandate will be necessary in order to compel market participants to achieve STP by improving the trade confirmation and affirmation process. The Institute urges that any such regulatory mandate be implemented in a series of interim steps, such as a requirement that 90 percent of affirmations be received by noon on trade date plus one (T+1) in order for trades to settle on trade date plus three (T+3). The Institute also recommends that ample time (e.g., a minimum of 24 months) be provided for the implementation of changes to the confirmation and affirmation process.

However, the Institute opposes mandating the use of a matching service by all participants in institutional trades. Instead, ICI supports the notion that market participants should be allowed to choose alternative methods for the confirmation and affirmation of trades, as long as that process is completed in the requisite time frame.

The Institute also supports the goals of reducing systemic risk and increasing efficiency in the U.S. clearance and settlement system, but is not in favor of shortening the settlement cycle to less than T+3 at this time. Instead, the letter expresses the belief that the SEC and the industry should focus on achieving industry-wide STP.

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In addition, a section of this website is devoted to the Institute's participation in many initiatives related to the structure and operation of the various securities markets.