FAQs – Shift to T+1 settlement cycle – Canada
In this section, you will find answers to the following questions.
Please see the separate FAQs for further information on the shift to the T+1 settlement cycle in Mexico and the U.S.A.
- What will be the instruments in scope?
- What will be the impact of T+1 on settlement?
- What will be the first T+1 trade date?
- What will be the last T+2 trade date?
- Will there be a change to the CBL settlement deadline?
- Will there be a change to the CBL provisioning period?
- Are there any changes planned to Swift MT541/MT543 formatting?
- Will there be any impact on asset servicing?
1. What will be the instruments in scope?
The Canadian Capital Markets Association (CCMA-ACMC) maintains a list of securities in scope of the shorter settlement cycle.
While no material changes are expected, the final regulatory texts confirming the scope has not yet been published.
Securities in scope include but are not limited to:
- Fixed income:
- Corporate bonds;
- Exchange traded debentures;
- Government bonds (excluding savings bonds);
- Convertibles;
- Preferred shares.
- Equities:
- Common shares;
- Rights;
- Warrants;
- Subscription receipts;
- Canadian Depository Receipts;
- Real Estate Investment Trusts.
2. What will be the impact of T+1 on settlement?
Canadian market settlement deadline
There will be no change to the Canadian market settlement deadline of 16:00 ET (22:00 CET T+1).
Canadian trade matching deadline
However, trade matching cut-off time is going to change. Indeed, the Canadian Securities Administrators adopted amendments to the National Instrument 24-101 Institutional Trade Matching and Settlement (NI 24-101).
The revised agent and institutional trade-matching deadlines in Canada will change from 11:00 ET (17:00 CET on T+1) and 12:00 ET (18:00 CET on T+1), respectively, to 3:59 ET on T+1 (9:59 CET on T+1). At this time, no new penalties will be introduced for non-compliance with NI 24-101 with the implementation of T+1 in Canada.
T+2 (Before 27 May 2024) | T+1 (Effective 27 May 2024) | |
NI 24-101 Trade Matching Deadline | 12:00 PM (Noon) ET on T+1 | 3:59 ET on T+1 (SD) |
The revised trade matching deadline is subject to ministry approvals. However, Clearstream Banking’s custodian, RBC Investor Services (RBCIS), does not expect further amendments to this cut-off up to 27 May 2024.
3. What will be the first T+1 trade date?
The Canadian Capital Market Association (CCMA) announced Monday, 27 May 2024 as the Canadian T+1 start date.
The Canadian market will be open for business on Monday, 27 May 2024.
Friday, | Saturday, | Sunday, | Monday, | Tuesday, | Wednesday, | Thursday, |
Last T+2 Trade Date | Conversion Weekend | Conversion Weekend | First T+1 Trade Date | Double Settlement Date | Trade and settle T+1 | Trade and settle T+1 |
4. What will be the last T+2 trade date?
Last trade date for a T+2 settlement will be Friday, 24 May 2024.
All trades concluded on this business day will have the settlement date Tuesday, 28 May 2024.
5. Will there be a change to the CBL settlement deadline?
Clearstream Banking S.A. (CBL) does not anticipate any change to its current settlement deadline. Please refer to Settlement times – Canada for details.
6. Will there be a change to the CBL provisioning period?
Clearstream Banking S.A. (CBL) does not anticipate any change to its current provisioning period. Please refer to Settlement times – Canada for details.
7. Are there any changes planned to Swift MT541/MT543 formatting?
Clearstream Banking S.A. (CBL) does not anticipate any changes to the MT541/MT543 Swift message formats. Please refer to Instruction specifications - Xact via Swift and Xact File Transfer - Canada for details.
8. Will there be any impact on asset servicing?
Corporate actions relating to exchange-traded securities are traded with or without any associated income distribution depending on the corporate action’s record date. The securityies are traded without a dividend on the ex-date – the trading day before the record date in today’s T+2 environment.
In a T+1 environment, the ex- and record dates will be the same (that is, T+1) in Canada.
In some cases, an exchange may set a later ex-date, for example, due to challenges for stock or large cash dividends, and the securities will be traded with a “due bill”. The U.S. has indicated that for trades in due bills, the ex-date will be the same as the due bill redemption date. Canada will adopt the same practice at the time of T+1 transition.
The transition to a T+1 settlement cylce also impacts “protect” or letter-of-guarantee periods for voluntary corporate action event (for example, rights subscription or tender offer) expiries, which usually align with the standard settlement structure (currently T+2). Investors can purchase securities even on the offer’s expiration date, with the protect feature “covered” once the securities settle in two days’ time. In a T+1 settlement cycle, the cover/protect or letter-of-guarantee period will be the expiration date plus one (1) trading day.
Finally, to reduce risk, the industry requests marketplaces to recommend that issuers try to avoid setting corporate-action-related dates during the days chosen to both start trading on a T+1 basis and the following day (T+1), which is a “double settlement” date (trades of the previous day due to be settled on T+1, as well as those from two business days prior to settling on the “old” T+2 basis).