SEC Chair Gensler Statement on Upcoming Implementation of T+1 Settlement Cycle

SEC Chair Gensler Statement on Upcoming Implementation of T+1 Settlement Cycle

By Prathamesh 27 May, 2024

The Securities and Exchange Commission Chair Gary Gensler issued the following statement on the conversion of the U.S. securities market to a T+1 standard settlement cycle, which will take place on May 28, 2024:

“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 the 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.”

On February 15, 2023, the SEC adopted a set of rule amendments and new 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 also 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.

The SEC originally established a standard settlement cycle of three business days (or T+3) for most securities transactions in 1993, shortening the prevailing practice at the time of settling securities transactions within five business days of trade date. In 2017, the SEC shortened the standard settlement cycle from T+3 to T+2. While previous transitions were successful, transition to a shorter settlement cycle may lead to a short-term uptick in settlement fails and challenges to a small segment of market participants. Despite such expected issues, the SEC has seen with each transition that shortening the settlement cycle benefits investors and reduces the credit, market, and liquidity risks in securities transactions faced by market participants.

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