SEC Approves T+2 Settlement

The US Securities and Exchange Commission (SEC) on March 22, 2017 adopted amendments to Rule 15c6- 1(a) under the Securities Exchange Act of 1934 (Exchange Act), to shorten the standard settlement cycle for securities transactions by broker-dealers from three business days after the trade date (T+3) to two business days following the trade date (T+2).1 The amendments are a response to changes in markets, technology, operations and infrastructure since the T+3 requirement was put in place in 1993. The amendments are intended both to reduce credit, market and liquidity risk (thereby reducing systemic risks) and to encourage technological development (to further reduce settlement times in the future). The amendments become effective May 30, 2017, with a compliance date for broker-dealers of September 5, 2017.

Background
The process of modern clearance and settlement has its roots in the so-called “paperwork crisis” of the late 1960’s,2 to which the industry and Congress responded with a series of measures designed to eliminate problems that had caused the crisis and reduce risks in the settlement process.