The T&T Stock Ex­change (TTSE) will be in line with glob­al best prac­tices when it in­tro­duces, start­ing April 15, 2024, a re­duc­tion in the pe­ri­od for trad­ing and set­tle­ment will from three busi­ness days to two.

The im­ple­men­ta­tion of this short­er set­tle­ment pe­ri­od is dubbed T+2.

This shift to T+2 means in­vestors can ac­cess their se­cu­ri­ties and funds ear­li­er, com­pared to the cur­rent T+3 frame­work, thus short­en­ing the cash ac­cess time by one day and pro­vid­ing in­vestors with quick­er op­por­tu­ni­ties to en­gage in trad­ing, the TTSE’s CEO Eva Mitchell ex­plained in an in­ter­view with the Busi­ness Guardian on Tues­day.

Mitchell said this mod­i­fi­ca­tion marked the first ad­just­ment since 2006, when the set­tle­ment pe­ri­od was es­tab­lished at five days, not­ing that short­en­ing the set­tle­ment pe­ri­od fa­cil­i­tates quick­er ac­cess to both funds and se­cu­ri­ties, po­ten­tial­ly lead­ing to more dy­nam­ic trad­ing ac­tiv­i­ties.

In ac­cor­dance with Sec­tion 40(4) of the Se­cu­ri­ties Act Chap 83:02, the TTSEC is­sued an or­der dat­ed De­cem­ber 18, 2023, ap­prov­ing the amend­ments to the fol­low­ing rules:

a. TTSE Rule - 212 deal­ing and ac­count pe­ri­ods

b. TTSE Rule - 203 ex-con­di­tion deal­ing

The ti­tles of the rules have been re­vised to:

a. TTSE Rule - 212 trad­ing and set­tle­ment pe­ri­od

b. TTSE Rule - 203 ex-con­di­tion trad­ing

In ex­plain­ing what ex-con­di­tion means, Mitchell said, “We have an ob­jec­tive to cre­ate a vi­brant cap­i­tal mar­ket and in that we must un­der­stand the needs of the lo­cal, re­gion­al and in­ter­na­tion­al mar­kets and we must al­so align our mar­ket with in­ter­na­tion­al stan­dards. In do­ing so, we have looked at dif­fer­ent func­tion­al­i­ties with­in the mar­ket, one be­ing our set­tle­ment pe­ri­od and we have ad­just­ed our set­tle­ment pe­ri­od down­wards to ac­tu­al­ly short­en it, from T+3 days to T+2 days, which bet­ter aligns it to in­ter­na­tion­al stan­dards.

“We know there are parts of North Amer­i­ca and US mar­kets that have al­ready moved from a T+2 cy­cle to a T+1, but we are now more aligned to in­ter­na­tion­al stan­dards and we be­lieve this paves the way for us to ac­tu­al­ly get even­tu­al­ly, a T+1 set­tle­ment and to our im­me­di­ate cy­cle set­tle­ment cy­cle to T+0.”

Mitchell fur­ther ex­plained a short­ened set­tle­ment pe­ri­od means there is a short­ened pe­ri­od where un­set­tled trades ex­ist.

“So the risk in the mar­ket or the mar­ket risks as­signed to that is re­duced. Even more im­por­tant­ly, what it means is that you have ac­cess to the pro­ceeds of your trade. In the event that you in the in­stance where you are a buy­er, you have your shares quick­er. And in the in­stance where you are sell­er, you have your funds quick­er. So that turnover is now short­ened from three days to two days, which means you have ac­cess to it in a short­ened pe­ri­od of time which means you can now act.

“So, if it is that you see an op­por­tu­ni­ty in the mar­ket, you don’t have to wait three days to cap­i­talise on that op­por­tu­ni­ty. You can now cap­i­talise on that op­por­tu­ni­ty in two days,” she de­tailed.

An­oth­er ben­e­fit the TTSE CEO out­lined it is that a short­er time pe­ri­od re­duces any sort of po­ten­tial for price volatil­i­ty.

“When I talk about us be­ing more vi­brant and us be­ing more at­trac­tive, not on­ly lo­cal­ly, re­gion­al­ly and in­ter­na­tion­al­ly, we must en­sure that we are able to craft our mar­ket and build our mar­ket so that we are able to at­tract per­sons from out­side to look in and in­vest in our mar­ket,” she said.

On why did these changes take so long to be brought to fruition, Mitchell said such changes do not take place overnight as sev­er­al fac­tors had to be tak­en in­to con­sid­er­a­tion.

In ex­plain­ing the process by which the T+2 was agreed up­on, Mitchell said a fea­si­bil­i­ty study was con­duct­ed, look­ing at stake­hold­er buy-in in­clud­ing bro­kers, in­vestors, “every­one that’s in­volved in the set­tle­ment cy­cle, every­one that’s in­volved in the trade cy­cle and trade process,” as well as banks and reg­u­la­tors.

Re­gard­ing the chal­lenges of T+2, Mitchell said the mar­ket ac­cep­tance had to be there not­ing,”We can’t tran­si­tion with­out our stake­hold­ers first be­ing on board and that is a process in it­self. It took some time, but this is where we are now. I think it’s a good in­di­ca­tion that the mar­ket ac­cep­tance and the mar­ket needs have changed.”

She al­so ex­pressed op­ti­mism about the pos­si­bil­i­ty of tran­si­tion­ing to T+1, align­ing more close­ly with glob­al norms, and ul­ti­mate­ly aim­ing for re­al-time, T+0 set­tle­ments.

This pro­gres­sion is seen as a crit­i­cal path in achiev­ing in­stant set­tle­ment cy­cles, re­flect­ing the TTSE’s com­mit­ment to en­hanc­ing its mar­ket’s dy­namism and at­trac­tive­ness.

Mitchell said she did not an­tic­i­pate a lengthy tran­si­tion pe­ri­od.

“The ad­van­tage that we have now is that we have use of tech­nol­o­gy and tech­nol­o­gy has en­abled im­prove­ments in op­er­a­tions, im­prove­ments in the en­tire cy­cle and/or the en­tire process flow and be­cause of our use of cut­ting cut­ting-edge tech­nol­o­gy we’re able to im­ple­ment things faster, so the tran­si­tion pe­ri­od will be short­er,” Mitchell said, as she em­pha­sised there are no draw­backs to T+2 as trad­ing can be done from the con­ve­nience of a phone or any portable de­vice.

“We are cre­at­ing an ecosys­tem that is sup­port­ive of cap­i­tal mar­ket growth, and we are al­so cre­at­ing an in­fra­struc­ture that’s al­so sup­port­ive of cap­i­tal mar­ket growth.

“...We’ve been see­ing a lot of in­creas­es in re­tail trades over the last I would say, three years. I be­lieve there has been over 50 per cent in­crease in re­tail trad­ing since we launched our on­line trad­ing plat­form...The idea is for us to get more lo­cal cit­i­zens in­volved in the stock mar­ket. We are do­ing so by way of all of us pro­vid­ing these dig­i­tal plat­forms which is ex­act­ly what the mar­ket wants and the mar­ket needs,” she added.

Mitchell al­so gave an up­date on a pro­pos­al TTSE’s chair­man Ian Nar­ine made last year, re­gard­ing the pos­si­bil­i­ty of us­ing TT dol­lars to buy shares list­ed on the US stock ex­change.

“What we have is the in­ten­tion to launch a new prod­uct and the prod­uct will give the in­vestor the ben­e­fit of cap­i­tal­is­ing or par­tic­i­pat­ing in the move­ment of an in­ter­na­tion­al in­dex, but in TT dol­lars. So the prod­uct is not struc­tured in such a way where you out­right own the in­dex but what you have is an op­por­tu­ni­ty to cap­i­talise on the move­ment of the in­dex...

“Right now, giv­en the US liq­uid­i­ty short­age and the lim­it­ed op­por­tu­ni­ties that lo­cal in­vestors may have in ac­cess­ing US dol­lars and be­ing able to use those US dol­lars to ac­cess the op­por­tu­ni­ties in the glob­al mar­ket, we at the stock ex­change are us­ing our in­no­v­a­tive and cre­ative minds to come up with the right prod­uct of course, wrapped around the right reg­u­la­to­ry frame­work so that it meets the needs and it’s at­trac­tive enough for the lo­cal in­vestors in TT dol­lar terms,” Mitchell de­tailed.

She said the ini­tia­tive was still be­ing de­vel­oped as “it is in in­fan­cy stages.”

How­ev­er, she’s hope­ful this could take place this year.

“Our time-frame is 2024, but that’s sub­ject to reg­u­la­to­ry ap­provals. Of course, as a self-reg­u­la­to­ry or­gan­i­sa­tion, we have to en­sure the in­tegri­ty of the mar­ket is main­tained, con­fi­dence in the mar­ket is still there and of course, the prod­uct is at­trac­tive enough to meet the needs of the mar­ket,” Mitchell said.

Not­ing that the stock ex­change is a path­way to build­ing one’s fi­nan­cial wealth, Mitchell en­cour­aged peo­ple to take ad­van­tage of these op­por­tu­ni­ties.

“ The com­pa­nies that are list­ed on the stock ex­change are com­pa­nies that we all pa­tro­n­ise... at some point in time we go in­to KFC, we go in­to Massy...We all have bank ac­counts. So if we have con­fi­dence enough in these in­sti­tu­tions to pa­tro­n­ise their ser­vices, then we should own a part of the or­gan­i­sa­tion. If even if it’s not for us, en­cour­age your kids to do it be­cause it is a good way to build fi­nan­cial wealth and se­cure your fu­ture,” Mitchell ad­vised.