SEC Clears Two-Day Trade Settlement Rule

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By Andrew Ramonas

The time frame to settle most trades has been shortened from three days to two, under a Securities and Exchange Commission rule adopted March 22.

The new T+2 rule is intended to decrease liquidity risk and the credit and market risk exposure that come with unsettled trades, Acting SEC Chairman Michael Piwowar said at the open meeting, which he called “Judgment Day for T2.”

The agency’s only members—Piwowar and Commissioner Kara Stein—joined then-Chairman Mary Jo White in a unanimous vote to propose the rule in 2016.

“I am pleased that the commission is now in a position to consider the adoption and implementation of a T+2 settlement cycle, thus terminating a long and overdue process,” Piwowar said. “It is finally time to say hasta la vista to the antiquated T+3 settlement cycle.”

The rule will cover stocks, bonds, exchange-traded funds and limited partnerships that trade on an exchange. Municipal securities also will trade at T+2, which the Municipal Securities Rulemaking Board worked with the SEC to adopt. Some other assets—including money market funds and options—generally settle on a T+1 basis now.

Broker-dealers will have to comply with the T+2 settlement cycle by Sept. 5. The Investment Company Institute, Securities Industry and Financial Markets Association and other financial services organizations already are preparing their members for the rule’s implementation.

“Taking one day out of the settlement cycle will mitigate friction in the clearing system and reduce the risk of a clearing problem that could spur market volatility,” ICI chief industry operations officer Marty Burns said in a statement to Bloomberg BNA. “And, importantly, these benefits will significantly improve market stability and efficiency for investors.”

The commission’s work on the trade settlement cycle isn’t over, however. Stein said she’s asked staff to study the effects of moving to T+2 over the next three years and consider whether further changes are needed.

“While movement to a T+2 standard settlement cycle is an improvement from the current T+3 standard, more can and should be done,” Stein said. “At this very moment, technological, operational and communications improvements exist that could enable T+1 and end-of-the-day settlement cycles.”

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To contact the editors responsible for this story: Phyllis Diamond at; Seth Stern at

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