T+2 End-to-End Testing Plan Being Developed by Industry Testing Group

The Industry Testing Group, a critical workstream branching off from the coordinated industry-wide effort to shorten the settlement cycle to two days (T+2) in the U.S., has been meeting since July to discuss and develop a recommended testing approach for all of the changes identified by the T+2 Industry Working Groups.

With broad participation from street-side and buy-side firms, as well as service providers, exchanges and other self-regulatory organizations (SROs), the role of the Industry Testing Group is to take the requirements from the Industry Working Groups and create a test plan.

This industry test approach is being developed concurrently with a detailed industry implementation plan, which is due to the U.S. Securities and Exchange Commission (SEC) on December 18.

“The mandate of the Industry Testing Group is not to create the test scripts for an individual firm’s own applications, but to develop a detailed plan for end-to-end testing across the entire settlement lifecycle,” said Charles Lichter, Vice President of Product Management, Broadridge, and a participant on the Industry Testing Group. “We have identified significant integration points, from trade entry to execution and all the way through clearance and settlement post-trade processing, that must be thoroughly tested if the industry is going to be successful implementing a T+2 settlement cycle.”

Testing Environment

One of the key areas of discussion for the Industry Testing Group is the need for an additional DTCC test environment. Because of the myriad integration points and the back-office implications, Lichter said some members of the Industry Testing Group are recommending that The Depository Trust & Clearing Corporation (DTCC) build an additional T+2 testing environment.

A survey was recently sent to members of the Industry Working Group, which will help advise the decision.

T+2 Implementation Date

Beyond the immediate objective of creating the test plan, the other open deliverable from the Industry Testing Group is to recommend the target implementation date when the industry will go live with T+2.

"The industry White Paper published in July called for implementation in Q3 2017, which is a pretty broad target,” said Douglas Gifford, Senior Director, Regulatory, Broadridge, and also a participant on the Industry Testing Group. “To pinpoint an actual go-live date, we’re considering holidays, option expiration dates, and peak processing days at the end of the month.”

Gifford said the Industry Test Group has also asked DTCC to provide historical trade volume statistics to help evaluate potential dates, looking particularly for low volume periods.

“We are looking for a solid date that we can recommend that will be the least disruptive to the industry,” Gifford said.