Industry Updates

Issuers ready ETF settlement cycles ahead of T+1

Global X and HSBC AM latest to shorten their settlement cycles

Theo Andrew

USA stock chart

Global X and HSBC Asset Management are the latest issuers to shorten the settlement cycles on their ETF ranges ahead of the move to T+1 in the US.

The asset managers both issued market notices detailing the changes across their ETF ranges ahead of the transition day, currently 27 May for Canada and Mexico and 28 May for the US.

HSBC AM said 18 ETFs will see their settlement cycles reduced while the changes will occur across 27 Global X ETFs.

Last week, State Street Global Advisors (SSGA) said it was shortening the cycle for 42 ETFs with significant exposure to US, Canadian and Mexican equities.

Europe will remain on a T+2 cycle, meaning asset managers have been rushing to prepare for the move with growing concerns around ETFs breaching UCITS funding rules.

ETFs risk breaching several UCITS rules including cash and overdraft limits following the move in the US.

The changes are aimed to help shield investors from the increased costs associated with settlement mismatches and underlying securities.

The European Securities and Markets Authority (ESMA) rejected calls from the industry for forbearance over the UCITS limits, meaning issuers and authorised participants will be required to manage the settlement between the fund and the underlying basket.

ESMA said it does not see any obstacles in the EU legislation for UCITS to deal with the US move to T+1.

Last October, ESMA issued a call for evidence to consult on shortening the settlement cycle across equities, fixed income and ETFs in Europe while the UK said it would look to coordinate its cycle with the EU.

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