The Toronto Stock Exchange and TSX Venture Exchange are proposing Special Settlement Terms of T+2 to all U.S. currency trades where normal T+3 settlement would fall on a U.S. banking holiday for stocks trading in U.S. dollars.

There are currently 80 listed securities on the TSX and TSXV that trade in US dollars and more are expected to be added to the TSX expanded U.S. Dollar Book in the second quarter of 2004. The normal settlement date for all trades is the Trade Date plus Three (T+3) on Canadian clearing days.

But, there are at least five U.S. banking holidays, which do not correspond with Canadian banking holidays. For 2004, these include Martin Luther King Day (January 19), President’s Day (February 16), Memorial Day (May 31), Independence Day (July 4), and Thanksgiving (November 25).

CDS utilizes the U.S. Federal Wire Service for settlement in U.S. dollars. As this service is not available on US banking holidays, all U.S. dollar trades due to settle on those holidays will “fail”. This creates problems with collateral obligations and dividends.

To address the issues, the exchanges propose T+2 settlement when it would fall on a U.S. banking holiday. This would address both the CDS risk model problem and the entitlement record date problem, it says.

The exchanges say that they understand that acceptance of this proposal may impose additional manual work for some brokerages’ operations divisions whose Order Management Systems do not provide for trades with special settlement terms.