Canada’s CSA wants to move settlement cycle for mutual funds to a ‘voluntary’ T+1

Rick Steves

The CSA has made it clear that the move to a T+1 cycle for mutual funds will be voluntary. CSA staff had earlier published a notice stating their view that mutual funds should voluntarily move to a T+1 cycle if the standard settlement cycle for listed securities in Canada is shortened to one day.

In a move aligned with global trends toward faster financial transactions, the Canadian Securities Administrators (CSA) are seeking to amend the regulations to facilitate a voluntary shortening of the settlement cycle for mutual fund trades. The proposal aims to change the settlement cycle from two days after the trade date (T+2) to one day after the trade date (T+1).

The proposed amendments to National Instrument 81-102 Investment Funds (NI 81-102) focus on two major areas:

Clarification on Payments: The amendments aim to clarify that payments for mutual fund purchases must be made no later than the reference settlement date disclosed by the mutual fund to the principal distributor or the participating dealer.

Redemption for Non-Payment: Another significant change involves paragraph 9.4(4)(a) of NI 81-102. Under the new rule, if a mutual fund opts for a T+1 settlement cycle, it must redeem its securities for non-payment on the next business day after the reference settlement date (T+2), as opposed to T+3 under the current regulations.

Canada already going with T+1 for equity and long-term debt

The proposal comes after the CSA published amendments to National Instrument 24-101 Institutional Trade Matching and Settlements, focusing on shortening the standard settlement cycle for equity and long-term debt trades in Canada from T+2 to T+1.

However, the CSA has made it clear that the move to a T+1 cycle for mutual funds will be voluntary. CSA staff had earlier published a notice stating their view that mutual funds should voluntarily move to a T+1 cycle if the standard settlement cycle for listed securities in Canada is shortened to one day.

The public comment period for the proposed amendments ended on March 17, 2023. The CSA received one comment letter, which supported the need for a technical amendment to facilitate a move to the T+1 cycle, particularly concerning the forced redemption for non-payment stipulated in paragraph 9.4(4)(a) of NI 81-102.

The proposed amendments are expected to have several ramifications:

Operational Efficiency: A T+1 settlement cycle will enhance operational efficiency and reduce counterparty risk.

Alignment with Global Standards: The move aligns Canada’s financial markets with global best practices, as many other jurisdictions are also considering or have already moved to a T+1 cycle.

Administrative Challenges: Without the proposed amendments, a voluntary move to a T+1 cycle could become administratively burdensome, as mutual funds would not be able to redeem securities for non-payment until two days after the settlement date.

The CSA’s proposal is now open for a 90-day comment period, and market participants are encouraged to provide their insights into these significant changes.

Read this next

Digital Assets

JPMorgan’s stablecoin ventures into interbank transactions

JPMorgan Chase & Co.’s proprietary digital token, JPM Coin, is set to expand its use case by facilitating interbank transactions on Partior, a blockchain ledger developed in collaboration with DBS Bank, Temasek, and Standard Chartered.

Retail FX

Interactive Brokers’ client base surges past 2.5 million

Interactive Brokers LLC (NASDAQ:IBKR) saw 1.89 million daily average revenue trades, or DARTS, in November 2023 compared to 1.93 million transactions in the prior month. The figure is three percent lower on a yearly basis, and also dropped slightly from a month earlier.

Executive Moves

Andrew Gibson launches TimberFX brokerage brand in Cyprus

After nearly two years at Tavira Securities as Head of Product Development, industry veteran Andrew Gibson is launching a new FX brokerage business based out of Cyprus.

Market News

US Dollar’s Trajectory Amidst Seasonal Trends and Economic Indicators in December 2023

As we traverse the final stretch of 2023, the noteworthy depreciation of the US dollar dominates the financial landscape

Inside View

Unlocking the Financial Potential of SMEs: Is FinTech the Key?

The rise of the gig economy for early-stage startups and freelancers has highlighted the increasing importance of small-scale business transactions and banking requirements. Unfortunately, this has also exposed a significant gap in the SME banking landscape.

Digital Assets

South Africa’s FSCA receives 138 crypto license applications

The Financial Sector Conduct Authority (FSCA) of South Africa is currently processing a slew of applications from cryptocurrency companies seeking operational licenses.


Exclusive Interview with Greg Rubin, Head of Axi Select: Unveiling the Future of Capital Allocation in the Financial World

Today, we are thrilled to kickstart another series of exclusive interviews with top executives in the financial services industry, hosted by our FinanceFeeds Editor-in-Chief, Nikolai Isayev. Our next guest is none other than Greg Rubin, the mastermind behind Axi Select.

Digital Assets receives UK’s EMI license, paving way for regulated expansion

Cryptocurrency exchange has been authorized as an Electronic Money Institution by the United Kingdom’s Financial Conduct Authority (FCA).

Digital Assets

Ripple’s Metaco joins Zodia Custody’s network for connectivity with Layers 0 and 1

“As the industry undergoes a pivotal transformation, our networked infrastructure is dedicated to standardise, govern and connect institutional digital asset flows — an essential step in forging use cases that transcend individual companies.”