TORONTO, May 27 (Reuters) - Canada, Mexico and Argentina

on Monday started to settle securities trades faster, halving

settlement time to one day, in a move designed to reduce

counterparty risk and improve market liquidity.

Settlement is the final stage of a trade, when buyers get

their securities delivered and sellers are paid.

Market participants and regulators in the United States are

paying close attention to the implementation of the so-called

T+1 in Canada, Mexico and Argentina because Wall Street will

shift to one-day settlement on Tuesday for equities, corporate

and municipal bonds and other securities.

As global markets are highly integrated, any hiccups there

could signalize potential issues for the United States too.

"Everything is bright green at this point in time. There are

no issues and everybody is extremely optimistic," said Keith

Evans, executive director of the Canadian Capital Markets

Association, a federally incorporated industry organization.

Volumes will likely be up to 25% lighter than normal due to

the U.S. holiday on Monday, making it "somewhat of an advantage"

for Canada, Evans added.

In Argentina, Gonzalo Pascual Merlo, chief executive of

local exchange operator BYMA, told Reuters that the change would

further strengthen the country's capital markets.

"Implementing this measure brings clear benefits for the

whole ecosystem, from liquidity providers to investors and other

participants," he said.

A BYMA spokesman added that implementing the quicker

settlement would "strengthen the friction-less arbitrage with

other global markets and reduce counterparty risk in normal

settlement, increasing security for capital markets

participants."

Although regulators have been discussing the implementation

of one-day settlement for a long time, it gained more traction

after the 2021 trading frenzy around the "meme stock" GameStop ( GME )

highlighted the need to reduce counterparty risk and

improve capital efficiency and liquidity in securities

transactions.

In China and India, the new standard is already in place,

while Britain and the European Union plan to shift in the coming

years.

The more countries or markets adopt T+1, the more efficient

the faster settlement it will be for global investors.

Currency trades funding securities transactions

currently settle in two days. Because of issues like this,

regulators and market participants expect a temporary increase

in trade fails. Research firm ValueExchange found in a survey

that market participants expect the trade fail rate to increase

to 4.1% after T+1 implementation from 2.9%.

"The next few days promise to be challenging," said Nawan

Butt, head of capital markets at Purpose Investments in Toronto.

"We have to spend the time to handhold all trades and make sure

trade fail rates remain low as funding costs are quite high with

the current interest rate backdrop."