(Adds quotes)

May 28 (Reuters) - U.S. trading moved to a shorter

settlement on Tuesday, which regulators hope will reduce risk

and improve efficiency in the world's largest financial market

but may temporarily lead to a rise in transaction failure for

investors.

To comply with a rule change the U.S. Securities and

Exchange Commission (SEC) adopted last February, investors in

U.S. equities, corporate and municipal bonds and other

securities must settle their transactions one business day after

the trade, instead of two, beginning Tuesday.

Here are some reactions:

JOHN OLEON, MANAGING DIRECTOR AT CLEAR STREET (a prime

brokerage)

"Tomorrow and the next day are the big days ... It comes

down to customer allocations and affirmations and that won't

really wash itself out for the next few days."

TED O'CONNOR, SENIOR VP, HEAD OF TREASURY SALES AT ARCESIUM

"I spoke to a number of my counterparts in the banking

world and in the asset management world and one of the things

that I have seen was there was an intentional effort to have a

little bit more cash on hand to address any fails that may come

out of this whole thing. I don't think it's a significant

increase, but it's certainly enough to be able to address a

normal settlement cycle that goes from two days to one.

"The mid-size, and the smaller managers are the ones

that we're going to be watching closely because they tend to be

more reliant on manual processes, on files coming from their

custody agents and their prime brokers in spreadsheets or in

PDFs ... and their processes are much more people-driven rather

than technology-driven."

JOE SALUZZI, PARTNER, CO-FOUNDER AND CO-HEAD OF EQUITY

TRADING, THEMIS TRADING, CHATHAM, NEW JERSEY.

"It's probably too soon to tell. I think everyone is

prepared for it. We've had things like this in the industry

before, so you prepare for it, and then wait and see basically.

I haven't seen anything new yet. We haven't had any problems.

Hopefully it goes well.

There will be some growing pains and a few hiccups I

would imagine... If there is something we'll all know pretty

quickly. Tomorrow morning we'll see if anything happened. It's

interesting because tomorrow it will be a settlement date for

two trading days - Friday and today's.

You could have potentially some issues with extended

settlements... But overall (T+1) is a good thing. When it comes

down to why they did it, it's lowering the risk. When there's

less time to settle, there's less risk."

NAWAN BUTT, HEAD OF CAPITAL MARKETS AT PURPOSE INVESTMENTS

IN TORONTO

"Every single asset manager out there is going to be

working very closely with their custodian today to make sure

everything can settle as quick as possible. But as far as

evaluating how the turnover has gone, that will require

aggregate data which is at earliest month-end, most likely

quarter-end."

"Throughout the day we will see if there are any issues.

I believe most managers have been very proactive in making sure

everything is booked properly ... There is a big value chain

involved in this process and now we have to make sure that the

t's are crossed and the i's are dotted and we'll be able to see

what fell through the cracks."

JEFF NAYLOR, CHIEF INDUSTRY OPERATIONS OFFICER AT THE INVESTMENT

COMPANY INSTITUTE:

"ICI has worked closely with our industry partners and

regulators to ensure a seamless transition to a T+1 settlement

cycle. To date, all T+1 implementation activities have been

completed according to plan. We are now operating in a T+1

settlement cycle and are monitoring transaction flow. Wednesday

is the last day market participants will settle T+2 transactions

coupled with the first day of finalizing T+1 trades, and we are

confident we will continue to see smooth execution.

"The US T+1 Command Center, co-led by ICI and SIFMA,

operated throughout the weekend to confirm readiness among major

market participants including DTCC, custodian banks, major

broker/dealers, buy-side participants, and trading and

infrastructure service providers to the industry. Additionally,

ICI and SIFMA updated regulators throughout the weekend

including the SEC, Federal Reserve Bank of NY, OCC, FINRA, and

Treasury."

SECURITIES INDUSTRY AND FINANCIAL MARKETS ASSOCIATION (published

on website)

"Over the weekend, SIFMA's T+1 Command Center was fully

engaged with the industry, discussing among the designated

participants such topics as conversion status information,

transparency into the activity of other participants, and issue

identification and socialization. That engagement will continue

throughout the week. The industry has taken steps to be ready

when the U.S. markets open today, which is the effective date of

the transition to T+1 settlement, and we look forward to

continued progress towards T+1 and helping investors and the

industry realize the benefits of this change."

NICK WOOD, HEAD OF EXECUTION AT MILLTECHFX AND MILLENNIUM

GLOBAL:

"The shift to T+1 is expected to reduce settlement risk but

comes with significant operational obstacles in the FX market.

For example, in Europe, it's estimated that $50bn-$70bn of daily

FX flows will no longer be able to settle via CLS, a key

component in managing settlement risk.

"Given that CLS has decided it won't be changing the current

cut-off times, after the US equity market closes there will be a

much tighter window of just two hours to process transactions,

execute the required FX trades to ensure dollars are available

and submit the trades to CLS.

"Those without a local US presence and who would have

historically executed the required FX trades the following

morning may have additional unintended costs. They could end up

extending execution and operational coverage into the late

evening which will potentially add to staffing costs. This may

also add to execution costs as they will be transacting during

illiquid hours. Alternative solutions such as pre-funding could

bring additional funding costs and utilizing their custodian due

to workflow simplicity may bring higher costs via fees plus

reduced transparency. Beyond this, the only other consideration

would be to accept settlement outside of CLS."

ERIC HUTTMAN, CEO OF MILLTECHFX:

"We expect most firms to make changes to staffing and

explore automating or even outsourcing, but with same-day

settlement looking increasingly likely, there is a significant

amount of work ahead for FX operations professionals to ensure

optimal workflows and a smooth transition."

BNY MELLON (published on website)

"We welcome this positive move to reduce settlement risk and

improve liquidity across the market. We will continue to closely

monitor the transition and keep this site updated."

ALEJANDRO FÉLIX, PRESIDENT OF THE MEXICAN ASSOCIATION OF STOCK

INSTITUTIONS' ADMINISTRATION COMMITTEE

"We live in a world that's ever more online. In an era where

everything is characterized by its immediacy, it no longer made

much sense to continue with last century's settlement

mechanisms."

"On the one hand, there is such a high correlation between

the American market and the Mexican market and, on the other,

there is an enormous appetite among the investing public for

stocks listed in the United States, which makes it very

important to have the same settlement cycle."