Settlement process - Canada
Settlement cycles
TD+2
To facilitate Canada’s transition to a T+2 settlement cycle on 5 September 2017, the Canadian Securities Administrators (CSA) published final amendments to National Instrument 24-101 Institutional Trade Matching and Settlement (NI 24-101). According to NI 24-101, effective 5 September 2017, the previous trade matching extension for non-western hemisphere clients will no longer apply and will change from 12:00 on T+2 to "earlier" on T+1. The institutional trade matching (ITM) exception reporting threshold remains at 90%.
Settlement flow
Settlement method and processing
- Method
- Delivery versus payment (DVP)
Positions for depository-eligible securities are transferred between participant accounts and paid for within the depository via a net daily cash settlement at the end of the day. - Over-the-counter (OTC)
Transactions ineligible for settlement within the depository are settled OTC. Brokers exchange the physical securities against cash payment at the counterparty's cage window. Settlement is generally completed by 17:00 (Toronto time) on settlement day (SD).
- Delivery versus payment (DVP)
- Processing
Securities transactions mainly settle through CDSX which has three distinct trade settlement processes, as follows:- Real-time Trade for Trade Settlement (TFT)
TFT transactions are settled on a DVP basis with simultaneous exchange of securities. A settled transaction cannot be unwound or reversed under any circumstances, even if a participant is in default.
Transactions settle through CDSX on a trade for trade (TFT) basis. TFT settlement can take place real time from 12:30 - 04:00 EST and from 07:00 until 16:00 EST. The majority of TFT settlements take place as part of a Batch Net Settlement (BNS) process that starts at 04:00 EST and runs until the batch is complete, generally between 05:30 - 06:00 EST. Free of payment transactions can also be settled between 16:15 and 19:30 on settlement date after payment exchange. - Continuous Net Settlement /Batch Net Settlement (CNS)
For CNS transactions, trade data are sent to CDS by the exchange or a broker. Exchange trades are “locked-in”, whereas TFT trades are affirmed intraday on a real-time basis. CDS provides a matching service to broker participants so that they can confirm non-exchangetraded instruments. - Intraday Continuous Net settlement (ICNS)
The ICNS settlement process is run at scheduled times during the business day. Only unsettled CNS transactions that are left over from the early morning batch process are eligible for settlement by the ICNS process.
- Real-time Trade for Trade Settlement (TFT)
Registration
Securities held at CDS are registered in the name of the depository's nominee at the time of deposit. Participants’ accounts are adjusted automatically upon settlement.
For physical securities, registration is maintained at the issuer's transfer agent and securities are registered in a nominee name.
Buy-ins
Buy-ins are uncommon in Canada. However, if a broker fails to deliver securities to another broker on the settlement date, the receiving broker may buy the securities at the current market price and charge any price difference to the delivering broker.