SEC Adopts Rules Implementing T+1 Settlement

Last week, a divided Securities and Exchange Commission adopted a set of rule changes requiring next-day (T+1) settlement of most equity trades by May 24, 2024. The suite of rules also require same-day trade allocations and affirmations, and T+2 settlement for firm-commitment underwritings priced after 4:30 p.m. Finally, the rules require clearing agencies providing matching services to work toward fully-automated “straight-through processing,” and to report to the SEC annually on their progress.

Announcing the rules, SEC Chair Gensler noted they were partially in response to “meme stock” trading disruptions in 2021, in which heavy volume and volatility required some brokerage firms to restrict trading in order to meet or avoid substantially-greater margin requirements imposed by clearing firms. Commissioner Crenshaw used her concurrence in the rule to advocate for an eventual move to same-day (T+0) settlement – regarded by many as actually heightening systemic risks, given current technology.

Securities and financial markets have been working toward T+1 settlement for several years. View the industry’s 2020 Implementation Playbook here. The industry supports the T+1 objective, but believes the SEC is unnecessarily rushing its implementation date to May 28, 2024 and prefers instead to wait until September 3, 2024 (when Canada will implement similar rules). See SIFMA Statement on Shortening the Settlement Cycle to T+1. Commissioners Peirce and Ueyda agreed, so dissented from the rules as adopted.

Securities settlements historically were T+5, moving to T+3 in 1993, and to T+2 in 2017.

More Details

The SEC’s Fact Sheet 

The Adopting Release, Rel. No. 34-36930

Peirce’s Dissent

Ueyda’s Dissent

Crenshaw’s Concurring Statement 

Posted in: SEC
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