ETFs
State Street shortens ETF settlement cycle before T+1 in the US
State Street Global Advisors (SSGA) has shortened settlement times for dozens of ETFs in anticipation of the move to a T+1 cycle in the United States.
A total of 42 ETFs with significant exposure to U.S., Canadian and Mexican stocks will have their creation and redemption settlement cycles reduced from two days to one.
This comes as the US prepares to move from a T+2 to a T+1 settlement cycle later this month, a move expected to have a significant impact on the European ETF market .
Products such as SPDR S&P 500 UCITS ETF (SPY5) and the SPDR S&P US Dividend Aristocrat UCITS ETF (USDV) will be impacted while global exposures such as SPDR MSCI World UCITS ETF (SWRD) will also see their cycle change.
As Europe remains in a T+2 cycle, European asset managers have been racing to prepare for this development, particularly due to concerns about ETFs breaking UCITS funding rules.
ETF risk break several UCITS rules including cash and overdraft levels following the decision in the United States.
Last month, the European Securities and Markets Authority (ESMA) rejected industry calls for changes to UCITS rules amid concerns that ETFs could be in breach. under misalignment T+1.
Industry figures had called for a temporary suspension of the Central Securities Depository Regime (CSDR) due to increased risks of settlement failure.
However, ESMA said it saw no obstacles in European law for UCITS to cope with the expected change in settlement cycles to T+1 in the United States.
In October last year, ESMA published a call for proof to consult on shortening the settlement cycle for stocks, fixed income and ETFs in Europe, while the UK said it would consider coordinate your cycle with the EU.