Canada: Canada's Move To A T-2 Settlement Cycle

Effective September 5, 2017, the settlement cycle in the Canadian and US securities markets will be shortened from three days after the date of a trade (T+3) to two days after the date of a trade (T+2). In Canada, this change follows the announcement on April 27, 2017 by the Canadian Securities Administrators of their intentions to adopt amendments to National Instrument 24-101 Institutional Trade Matching and Settlement and its companion policy, to achieve a smooth transition to T+2 for equity and long-term debt market trades.

Benefits of the Change to T+2

The change from T+3 to T+2 will keep Canadian markets in line with simultaneous changes in the US markets, providing a uniform period for settling securities by T+2. It will also harmonize Canadian markets with the markets in Asia-Pacific, Europe, Australia and New Zealand, which have already made the move to T+2 settlement cycle. Overall, the move to T+2 is expected to enhance market efficiency, simplify cross-border trading, and reduce counterparty, market and liquidity risks.

Transition Period

The change to a T+2 settlement cycle will result in ex-dates for dividends, distributions and other corporate actions changing from two business days prior to the record date to one business day prior to the record date. As a result of this transition, no listed security will commence ex trading on Tuesday, September 5, 2017. The chart below provides examples of the ex-dates under the new T+2 settlement cycle:

(1) Last day of T+3 settlement cycle.
(2) First day of T+2 settlement cycle.
(3) September 4, 2017 is a holiday and there will be no ex-date on this date.

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