SEC Reduces Settlement Cycle For Securities Trades

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Both SEC commissioners voted to modernize regulations that require stock and bond trades to settle within three business days, shortening that timeframe to two business days.
United States Corporate/Commercial Law

Both SEC commissioners voted to modernize regulations that require stock and bond trades to settle within three business days, shortening that timeframe to two business days. The amendment is designed to reduce credit and market risk, including the risk of a trading counterparty defaulting. While technology now allows investors to make trades in less than a second, since 1993 the SEC's rules have required brokers to wait for three business days between the time an investor's order is executed, to when the cash and ownership of the security are exchanged. Acting SEC Chairman Michael Piwowar called the previous T+3 settlement cycle "antiquated" and added the shorter time frame will reduce "the time horizon for risk exposures" and also "should improve capital efficiency and enhance the resilience of the national clearance and settlement system." Broker-dealers must comply with the amended rule beginning on Sept. 5, 2017.
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