Amendments to UMIR and IDPC Rules to facilitate the investment industry’s move to T+1 settlement

1. Background

Currently, the standard securities settlement cycle in Canada and the United States (U.S.) is two days after the date of the trade. On February 15, 2023, the Securities and Exchange Commission adopted rule changes to shorten the standard settlement cycle from T+2 to T+1. It is important that Canada’s settlement cycle continues to be harmonized with the U.S. settlement cycle, because of the close connections between our capital markets. Canada plans to implement the move to T+1 on May 27, 2024 which is one day in advance of the U.S.’ move to T+1.

Additional background and details of the Amendments are included in Bulletin 23-0054.

2. Comments received

We received one comment letter in response to Bulletin 23-0054. We have not provided a response to the comment letter because the commenter did not provide any specific comments on the proposal.

3. The Amendments

The Amendments:

• harmonize the UMIR and IDPC Rules with the T+1 settlement cycle by shortening delivery and settlement periods by one day,
• modernize the IDPC Rules related to buy-ins and physical delivery,
• repeal requirements for Dealer Members (Dealers) to file broker-to-broker trade matching exception reports, for consistency with the proposed revisions to National Instrument 24-101 – Institutional Trade Matching and Settlement, and
• align IDPC Rules referencing settlement periods of mortgage-backed securities to the industry settlement periods set under the NHA Mortgage-Backed Securities Program. 

A blackline of the Amendments1  are set out in Appendix A. A clean copy of the Amendments is set out in Appendix B.

4. Guidance

Concurrent with this bulletin, we are publishing Guidance Note GN-4800-23-001 - Guidance on the regular settlement date to be used for certain foreign exchange hedge trades. The Guidance reflects the change in settlement date and recommended practice under T+1 settlement and replaces GN-4800-21-001.

5. Implementation

The Amendments and the Guidance will be effective on May 27, 2024. In the event there is a delay in the industry’s implementation of T+1 settlement, we will also delay our implementation of the Amendments and Guidance accordingly.

5.1 Trade matching exception reports

The Amendments include repealing the requirement for Dealers to file quarterly broker-to-broker trade matching exception reports. Since the Amendments will be effective on May 27, 2024, Dealers will not be required to file a quarterly trade matching exception report for the June 30, 2024 quarter-end. We expect the last quarterly report to be filed for the March 31, 2024 quarter-end.

5.2 Extended failed trade reporting and short position reporting

Given the move to T+1 settlement, Participants and Access Persons are reminded of the impact to:

• extended failed trade reporting
• short position reporting

Participants and Access Persons that file extended failed trade reports and short position reports should update any systems as necessary in order to ensure the timely and accurate submission of such reports.

5.2.1 Extended failed trade reporting

Pursuant to UMIR 7.10, Participants and Access Persons are required to notify CIRO of trades that fail for ten trading days past settlement date, which is currently T+2 and will change to T+1 after the move to T+1 settlement.

5.2.2 Short position reporting

Under UMIR 10.10, the due date for Participants and Access Persons to submit their short position reports will remain the same (i.e. two trading days following the calculation date). However, the move to T+1 settlement will affect timing of the calculation of short positions, as reported positions are based on settlement date.

6. Appendices

Appendix A - Black-line comparison of the Amendments to current rules

Appendix B - Clean copy of Amendments

Appendix C – Guidance on the regular settlement date to be used for certain foreign exchange hedge trades

• 1Note that the French version also includes minor drafting changes (see IDPC Rule clause 4760(1)(iii) and subclause 4805(1)(ii)(a)).