The U.S. securities market will soon by switching to a T+1 standard settlement cycle, starting on May 28.
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Last February, the Securities and Exchange Commission (SEC) adopted rules to facilitate the shortening of the standard settlement cycle for most broker-dealer transactions from two business days after the trade date (or T+2) to one business day after the trade date (or T+1).
The new rules are also designed to improve the processing of institutional trades by establishing new processing and recordkeeping requirements for broker-dealers and registered investment advisors, respectively. Further, the rules established a new requirement to facilitate straight-through processing by central matching service providers.
“For everyday investors who sell their stock on a Monday, shortening the settlement cycle will allow them to get their money on Tuesday. Shortening the settlement cycle also will help the markets because time is money and time is risk. It will make our market plumbing more resilient, timely, and orderly. Further, it addresses one of the four areas the staff recommended the Commission address in response to the GameStop stock events of 2021.”
Since the SEC voted to establish a T+1 settlement cycle, SEC staff has been monitoring the efforts of market participants to prepare for the shorter settlement cycle and coordinating with regulatory authorities in North America, Europe, Asia, and other jurisdictions around the world. In March, SEC staff published a risk alert, responses to frequently asked questions, and an Investor Bulletin to help market participants prepare for the upcoming move to T+1.
The SEC originally established a standard settlement cycle of three business days (or T+3) for most securities transactions in 1993, shortening it from five business days of trade date. In 2017, the SEC shortened the standard settlement cycle from T+3 to T+2.
The post U.S. markets prepare for T+1 settlement starting May 28 appeared first on Financial Regulation News .
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