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The Shift from T+3 to T+2

On March 22, the Securities and Exchange Commission (SEC) adopted an amendment aimed at shortening the settlement time frame for security transactions from three days to two days. This shift, from trade plus three days (“T+3”) to trade plus two days (“T+2”) is one which has been on the investment industry’s horizon for what seemed like eternity, and yet was always pushed to a back burner in favor of more pressing issues. The more from T+3 to T+2 signifies a major, yet long overdue, step in speeding up the settlement of trades. This shorter settlement period will help to reduce risk (notably counterparty risk), as well as to increase market efficiency.

Mayra Rodriguez Valladares, Managing Principal of MRV Associates, noted that “It is incredible its taken this long for this approval to come through, but am glad to see it was an unanimous vote. The SEC is very serious about this rule.” She further noted that “Technology has moved to the point that T+2 is possible; the buyside would be a natural actor in this market, who would want as short a cycle as possible.”

The new T+2 settlement standard is scheduled to go into effect on September 5, 2017, although This change will impact broker dealers, traders, portfolio managers, and perhaps most significantly firms involved in clearing, such as The Depository Trust & Clearing Corporation (DTCC).

Further information is available on the SEC’s website, at: https://www.sec.gov/news/press-release/2017-68-0

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