SEC adopts two-day settlement cycle for securities transactions

Linus Unah – Fourth Estate Contributor

Washington, D.C., United States (4E) – The U.S. Securities and Exchange Commission (SEC) said Wednesday that it has adopted an amendment to shorten by one business day the standard settlement cycle for most broker-dealer securities transactions.

Currently, the standard settlement cycle for these transactions is three business days, known as T+3.

The amended rule shortens the settlement cycle to two business days or T+2.

The U.S. regular said the amended rule would enhance efficiency, reduce risk, and ensure a coordinated transition by market participants to a shortened standard settlement cycle.

“As technology improves, new products emerge, and trading volumes grow, it is increasingly obvious that the outdated T+3 settlement cycle is no longer serving the best interests of the American people,” said SEC acting chairman Michael Piwowar.

“The SEC remains committed to ensuring that U.S. securities regulation is reflective of modern times, and in shortening the settlement cycle by one day we aim to increase efficiency and reduce risk for market participants.”

Broker-dealers will be required to comply with the amended rule beginning on Sept. 5.

Generally, this change would mean that when an investor buys a security, the brokerage firm must receive payment from the investor no later than two business days after the trade is executed.

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