On May 28, 2024, the SEC mandated change from a “T+2” to “T+1” standard settlement cycle for most broker-dealer transactions went into effect. This capped a years-long effort by financial institutions across the spectrum to adjust, install, modify, test, train, and ensure they were ready to accommodate the endeavor. The change to shorten the settlement cycle from “T+5” to “T+3” occurred in 1993, and then from “T+3” to “T+2” in 2017. The purpose of these efforts is to reduce risk, and strengthen and modernize securities settlement in the U.S. financial markets. In addition to lower risks, investors now have lower costs associated with the margin needed to post with clearinghouses, and quicker access to funds.

Much work went into the process to not only deliver securities one day earlier but to address issues such as:

• Fails-to-deliver
• Fails-to-receive
• The process of reclamation
• Regulation SHO
• Buy-ins
• Sell-outs
• Other settlement methods such as DVP/RVP

Yes, it is expected that settlement will eventually move to intraday or “T+0” thanks to ever-evolving and improving technology. Companies such as Fi-Tek are continually looking to improve performance and enhance our clients’ experience. Like the efforts for “T+1”, most don’t see the work and effort behind the scenes. Though it has only been a couple of weeks, overall the change seems to have gone off without a hitch and therefore a huge success. Thus, Silence is Golden, because we would have all heard about it if it didn’t.

Jim Okamura
Senior Managing Director, Advisory Solutions
Fi-Tek, LLC