Stock trades to be settled faster in Trinidad
INVESTORS purchasing and selling stocks on the Trinidad & Tobago Stock Exchange (TTSE) will as of mid-April see those trades being settled two business days after the transaction, instead of the current policy of settling three business days later. Settling trades two days after the transaction is referred to in financial markets as the T+2 cycle (T being the trade date plus two business days) is part of efforts to improve liquidity in the market.
The change mean that equity and mutual fund trades will now move from the current T+3 cycle to the new T+2 cycle effective April 15. Thus, for example, instead of an investor having to wait until Thursday to receive cash after selling a stock on a Monday, they can now receive cash on Wednesday instead.
This settlement change for equities will also result in the alignment with TTSE Government and Corporate bond markets which already use the T+2 cycle. This is an improvement from the T+5 settlement period which was changed in January 2006 and T+10 when the TTSE was founded in October 1981.
The announcement comes one month after the Trinidad and Tobago Securities & Exchange Commission (TTSEC) approved various other amendments to rules governing transactions on the TTSE.
“The TTSE believes that a faster and more efficient T+2 settlement cycle, supported by capable technology, is expected to yield great benefits to the market and will have a positive impact on the market’s liquidity. A T+2 settlement cycle will streamline and increase flexibility in securities trading as well as subsequent transactions. With the shorter two-day settlement date, investors can more quickly turnover their capital as they realise faster returns. At the same time, the seller/payee will receive payment more quickly allowing for enhanced management of investment capital and the opportunity to make other investments in a timely fashion,” stated the February 2022 statement of substance submission by the TTSE to the TTSEC.
One of the reasons listed for shortening the settlement cycle was to promulgate increased interest and activity in cross listings between the TTSE and Jamaica Stock Exchange (JSE) where T+2 is the current settlement cycle. However, the TTSE’s reduced settlement times will come into effect one month before Jamaica itself moves to the shorter T+1 cycle scheduled for May this year. Canada and the United States of America will also be moving to the T+1 cycle at the end of May.
The proposed changes were also meant to align with the global settlement harmonisation and better align with international practices to allow seamless transactions both regionally and internationally.
The TTSE highlighted in an Instagram post that the shorter settlement time will also improve investor confidence.
The TTSE, which is currently led by Chief Executive Officer Eva Mitchell, is currently seeking to expand on different initiatives not just at home, but across the region as well. Retail investors made up 80 per cent of the trade value on the TTSE in 2023 with 32 per cent of market trades taking place on TOP, its online trading platform launched in July 2020. The TTSE also led the Caribbean as it had the highest average dividend yield across the region along with three companies trading at new all-time highs.
The TTCD (Trinidad & Tobago Central Securities Depository) oversaw the first fully digital government bond in January 2023 with this market segment contributing to 10 per cent of the overall trade value.
“A key responsibility of a stock exchange is to bring depth and liquidity to the market. We need to develop and enhance secondary market activity. One initiative along these lines is the concept of market making. The presentation on Market Making allows us the opportunity to raise the profile of this topic and to give all our stakeholders an opportunity to better understand what it is about and what we are seeking to achieve,” Mitchell told the Jamaica Observer in a previous interview.