The Securities and Exchange Commission has voted to propose rule changes to reduce risks in the clearance and settlement of securities, by reducing the settlement cycle to one business day.
SEC Chair Gary Gensler, says: “As the old saying goes, time is money. Shortening the settlement cycle should reduce the amount of margin that counterparties would need to post with clearinghouses. Second, these changes would require affirmations, confirmations, and allocations to take place as soon as technologically practicable on trade date (“T+0”). Finally, the release would require clearing agencies that provide central matching services to have policies and procedures to facilitate straight-through processing — i.e., fully automated transactions processing.”
The SEC's move follows a december report published by The Securities Industry and Financial Markets Association (Sifma), the Investment Company Institute (ICI), and The Depository Trust & Clearing Corporation (DTCC), detailing changes market participants need to consider and implement in order to transition from T+2 to T+1. The agencies are targeting a move to next-day settlement in the first half of 2024.
The SEC is soliciting feedback on its proposals, giving firms 60 days to comment on the rule changes.