The Canadian Capital Markets Association has confirmed that Canada’s markets will act in harmony with the United States to implement straight-through processing for the settlement of securities.

On Thursday, the U.S. Securities Industry Association, which represents more than 600 American securities firms, announced a new focus for tackling the transition to T+1 settlement that will likely push back the timeline for implementation.

The SIA says the industry will focus on STP in 2003 and 2004, rather than on moving to T+1 in 2005. The SIA believes that shortening the settlement period should be evaluated again in 2004.

T+1 is a volunteer-driven initiative to shorten the securities settlement cycle (the exchange of cash for securities bought or sold) from the current standard of three days to the day following trade date. The Canadian initiative, spearheaded by the Canadian Capital Markets Association, is designed to coincide with the U.S. target implementation date, originally slated for June 30, 2005.

Tom MacMillan, chair of the CCMA as well as president and CEO of CIBC Mellon in Toronto, says the CCMA will continue to move “in lockstep” with United States initiatives.

He says the board is still enthusiastic about initiatives to achieve straight through processing “with the understanding that there is an enormous need for cooperation among all the players in the industry” but added there is no question final implementation will likely be delayed.

Canadian industry projects include developing an institutional trade matching system, implementing a new equities clearing system, completing of a set of best practices and standards, a shift from manual processing for the retail industry and significant improvements in corporate actions, securities lending and other aspects of securities processing.

Cost and the sheer size of the task are the main reasons for delay and shift to focus on the more manageable task of getting STP systems in place.

“One of the things that sort of hampered us in the last year was this focus on (the 2004 date). Really it confused the issue and took a lot of effort and energy away from what really needs to happen.”

“We think a 2004 review is appropriate. In the meantime we’re going to continue with enthusiasm to achieve STP with a hope that will ultimately result in shortening trade periods.”

According to the CCMA, market conditions such as increased securities volumes and market volatility, motivated the move from T+5 in 1995. These, along with newly extended hours of operation and increased global trading also play a significant role in the decision to move from T+3 to next day settlement.

In Canada, the move to T+1 was seen as a way to prevent securities trading and other related revenues from migrating to the United States as it implemented T+1.