WASHINGTON -- Chances that world markets can begin streamlining the settlement of stock and bond trades by 1993 grew dimmer yesterday as an international panel examining how to settle trades within three days announced it is shifting the issue to a task force for further study.
"We are announcing a new phase of activity," the chairmen of the U.S. Committee of the Group of 30 Clearance and Settlement Project announced in a memorandum to panel members released yesterday that discusses how to deal with the so-called "T + 3" concept for settling securities trades.
"We will focus on implementing those recommendations that have achieved consensus, while the issue of how best to move to T + 3 becomes the responsibility of a task force," said Marshall Carter, president of State Street Bank & Trust Co., and Ronald Readmond, executive vice president of Charles Schwab & Co.
The chairmen plan to channel their energies for now into implementing three proposals that have run into fewer roadblocks: book-entry settlement for all market participants by 1992; settlement in same-day funds for all markets by 1992, assuming clearing agencies say it is doable; and depository eligibility for all new issues by 1992.
The issue that will undergo further study -- the centerpiece of the Group of 30 efforts -- is the aim to settle securities within three days of trade date, or T + 3, rather than the customary five days. At issue is whether the aggressive 1993 timetable for implementing T + 3 is doable for the retail market, including municipal securities.
A subcommittee set up at the request of the Securities and Exchange Commission and chaired by Howard Shallcross, senior vice president and director of operations at Merrill Lynch, Pierce, Fenner & Smith Inc., has been studying the retail question. However, it has not made its findings public.
The new task force will be established under the Group of 30's steering committee.
"There's no question" that this will delay the timetable for T + 3, said one industry source, who asked not to be identified. "It puts very much at risk the 1993 date that was recommended."
He said the "toughest nut to crack" is whether customer money will be available on day three after the trade. "It's a big issue for both corporate and municipal securities."
The task force is expected to consider whether there should be different treatment for settlement of retail trades in the municipal market, the source said. "Municipals may have some of the same issues as corporates, but there are also differences. There's not a lot of secondary market trading by retail customers. Disclosure rules and the degree of enforcement are also different."
Dominick Antonelli, chairman of the Public Securities Association task force monitoring Group of 30 recommendations, wrote the panel earlier this year, warning that the "aggressive time frames" could have "serious desruptive effects" on the municipal securities market, "given its heavy retail orientation and its unique distribution system through regional dealers and dealer banks."
Mr. Antonelli strongly urged the group to study the issue more thoroughly before reaching any conclusions. He said there should be no "severe difficulties" in settling dealer and institutional customer transactions in the municipal market by 1993.
"Everyone is still committed to T + 3," the source said. "The question that continues to circulate is how long it's going to take to get there."
SEC Chairman Richard Breeden recommended the new task force in a July 11 letter to Lewis Bernard, chairman of the Group of 30 steering committee. "Such a task force could review the key issues involved in shortening the settlement cycle, identify practical solutions to each of those issues, and propose reasonable implementation schedules for each of those solutions.
"In framing its proposals, the task force could, to the extent possible, attempt to address the differing needs and concerns of ... corporate and municipal issuers," Mr. Breeden said.