US regulator SEC has swung the hammer on “final rules” for the shortening of the standard settlement cycle to “T+1”, setting the compliance date already on 28 May 2024. Having done a round of reaction interviews across the industry, news outlet Global Custodian cites “shock”.
“Today’s adoption addresses one of the four areas the staff recommended the Commission address in response to the meme stock events of 2021. Taken together, these amendments will make our market plumbing more resilient, timely, orderly, and efficient,” said Gary Gensler, chair of the United States Securities and Exchange Commission, in a press release announcing the decision on Wednesday.
It was in early 2021 that US central securities depository DTCC started laying out its plans for settling transactions already on the day after their trade (T+1) rather than two days after the trade, as is the practice today (T+2). At that point, the vision was even to have it done in 2023, and the SEC later talked about 31 March 2024. Last summer, however, a “playbook” by DTCC described a path to implementation in the third quarter of 2024, so the SEC decision this week could appear urgent in comparison – seemingly to a surprising degree.
“T+1 when they come into the office”
Global Custodian now notes “shock”. In a comment to its LinkedIn post, Damian Hoult of Basis Global Analytics chips in that “[t]he implications for APAC based funds where it is T+1 when they come into the office are enormous”.
In Europe, Britain has indicated that it will use its regained regulatory independence from the EU to take a regional lead on the settlement cycle shortening. Elsewhere, India has been progressive.
In a comment to the US decision, the Association for Financial Markets in Europe notes that “[t]he May 2024 goal for moving to one-day settlement in the US is ambitious and will be a significant challenge for all market participants globally”.
“The move to accelerated settlement cycles is seen as a way to lower risks to financial systems and drive greater efficiencies in post-trade processes and other jurisdictions are now commencing their reflections on this process. However, adopting T+1 settlement in Europe will be significantly more challenging, given the fragmented nature of European markets and the greater operational, structural and regulatory complexity,” it adds.