T+3 is back!

Investors longing for the days of 1999 when they would buy shares and pay later will be overjoyed to hear that their beloved system of trading on “thin air” will be back from the very first day when the common trading platform is launched.

The current system imposed by the SEC obliging local investors to have cleared funds in client accounts before a trade is allowed to proceed will be scrapped to the delight of investors who with the new system will be able to buy shares and pay after three days.

The T+3 (transaction plus three days to settle) will come back with a vengeance, since even if the Cypriot authorities wish to impose restrictions, they can’t, since the House has already voted through the law bringing the local trading rules to mirror the Greek trading system, which trades on T+3.

Even if the Cyprus SEC does get in the way, there is a way out since Cypriot investors will be able to open accounts with Greek KEPEY and trade local stocks through Greek brokers, who answer only to the Greek Capital Markets Commission.

All for custodians

Local speculators need not worry about the T+3 rules, since even the CSE is working hard to scrap the cleared-funds rule, according to which Cypriot investors must clear funds in their accounts before they trade.

The reason the CSE is aggressively promoting T+3 is because it wants to attract custodian firms to come to Cyprus, which is the only way to attract foreign institutional investors as no serious fund manager gives money to a broker and waits for the trade to happen. Instead, foreign fund managers insist to trade first and get confirmation that the broker has done the transaction according to their requirements and only if everything is in order, then pay.

The introduction of the T+3 rule is perhaps the most significant issue that will be felt by investors when the common trading platform is launched, in addition to the directive to trade equities in euros.