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Failed Wall Street trades rate roughly stable under faster settlement

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NEW YORK (Reuters) – The rate of U.S. failed trades stood at 1.90% on Wednesday, a big test day for the recently implemented faster settlement cycle, roughly stable from Friday’s number, Depository Trust & Clearing Corporation (DTCC) showed this morning.

Market participants were expecting it to increase to 4.1% after T+1 implementation, from 2.9%, according to research firm ValueExchange. On Friday, before the settlement period was halved to one day in the U.S., the fail rate was at 1.92%.

The affirmation rate, another indicator the industry closely watches to show trades participants have verified and agreed on details, also went up to 94.55% on Wednesday, almost two percentage points higher than on Friday.

The higher the affirmation rate, the more likely trades are to be successfully settled.

On Tuesday, U.S. trading of equities, corporate and municipal bonds and other securities moved to a one-day settlement cycle (T+1) from two days (T+2), to comply with a rule change adopted in February by the U.S. Securities and Exchange Commission.

Wednesday was the first big test for Wall Street as it settled trades executed last Friday, when T+2 was still in place, and trades from Tuesday, the first day of T+1. This was expected to lead to a rise in volume.

Despite smooth first days of the so-called T+1, market participants say it is still early to predict if rates will remain at those levels. A more comprehensive analysis would take at least a couple of weeks.

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