Brexit, T+3

Not enough has been written to describe the incredible performance last Friday by our nation’s exchanges and markets in the face of the Brexit vote and the rebalancing of the Russell indices. In addition to the record trading volumes at both the openings and closes our markets experienced a record number of top level quote updates which according to the financial technology firm, S3 top 15 billion (yes, billion) for just the listed derivatives markets. It was truly a day where the competitive frictions between all market participants be put aside with everyone tipping their hat to the other on a job well done.

It is now three 3 days later and there exists another section of our market place equally as important and worthy of praise for their roles in keeping our markets functioning smoothly during times of high volatility, and that is the clearance and settlement processes for the equity and listed derivatives markets, commonly referred to as T+3 for the former and T+1 for the later. Few people involved in trading understand the C&S process, its history and the critical role it plays the safety and soundness of our markets. In a 1975 speech by then SEC Commissioner Philip Loomis he traces back the catalysts for the legislation which our C&S process is designed under to the “distressing events of 1968-1971 when an unexpected surge in trading volume caused the securities industry to almost drown is a sea paperwork”. This event came to be known as the Paperwork Crisis when the NYSE exchange closed every Wednesday from June 12, 1968 to December 31, 1968 in order to process average daily volumes of 20 million shares on a T+5 basis. Incredible how far we have come and to all clearing firms, clearing houses and depositories, today we tip our hat to you.

Our industry has evolved at an incredible pace these past 50 years and today is good day to pause give credit to where it is due, to the legislators who created the Securities and Exchange Acts which foster competition and regulation; to our nations regulators who implement these Acts and enforce them; and to all the market participants who represent some of the brightest and most entrepreneurial minds in the world. Our markets remain the envy of the world and while it is speed which captures most, if not all the attention we need to remember that infrastructure upon which our clearance and settlement processes work on are equally as worthy of our recognition.

See June 2016 Newsletter Here