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.
A technical glitch affecting the dissemination of market data for the S&P and Dow Jones indexes for more than an hour on Thursday has been resolved, S&P Dow Jones Indices said.
Trading continued normally with the benchmark S&P 500 index and the Dow Jones Industrial Average down 0.2% and 0.7%, respectively.
S&P Dow Jones Indices said it was aware there was an issue impacting the transmission of its real-time index values from about 10:41 a.m. to 11:51 a.m. EST.
“The system is up and running and the real-time index values are being disseminated normally,” it added.
The firm said it is continuing to investigate the root cause of the outage.
Trading appeared unaffected during the data freeze, according to reports by CNBC and Bloomberg News.
Salesforce shares plunged 21%, a day after the company forecast second-quarter profit and revenue below Street estimates due to weak client spending on its cloud and enterprise business products.
The S&P 500 technology sector dropped 1.6% and was the biggest drag on the benchmark index.
A Commerce Department report showed the economy grew slower in the first quarter than previously estimated, after downward revisions to consumer and equipment spending and a key measure of inflation ticked lower, ahead of Friday’s personal consumption expenditure report for April.
Another set of numbers showed weekly jobless claims rose more than expected.
“Normally you’d expect the market to rally off of a downward revision to GDP because it signals the economy is moderating, the Fed’s job is done, we can get rate cuts. That’s not the reaction we’re getting today,” said Mark Hackett, chief of investment research at Nationwide.
“So I’m a little surprised but not that surprised simply because after the six week (rally) that we’ve had, it’s pretty healthy and expected to see some consolidation or sideways move for a while.”
U.S. Treasury yields dipped following the report, while chances for an at least 25-basis-point interest rate reduction in September edged up to 50.4%, from 48.7% before the data, according to the CME Group’s FedWatch Tool. Bond yields had hit multi-week highs earlier in the week.
The Dow Jones Industrial Average fell 271.04 points, or 0.71%, to 38,170.50, the S&P 500 lost 11.30 points, or 0.21%, to 5,255.65 and the Nasdaq Composite lost 73.04 points, or 0.43%, to 16,847.43.
Among the day’s gainers, HP jumped 18.4% after it posted better-than-expected second-quarter revenue.
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