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Mar 27, 2017

SEC Adopts Rule to Shorten Settlement Cycle on Securities Trades

Featuring David Grumer

On March 22nd, the SEC adopted an amendment to its rules to shorten the securities settlement cycle to two business days, known as “T+2”. Broker-dealers will be required to comply with the amendment to Rule 15c5-1 beginning on September 5, 2017, almost one year from the date the rule amendment was proposed in 2016. The revised SEC rule establishes a standard time frame of two days for U.S. equity, corporate and municipal bonds, and unit investment trust trades. 

The change comes with industry support. For example, Depository Trust & Clearing Corporation (DTCC) and Securities Industry and Financial Markets Association (SIFMA) have both commended the SEC for the change.  The move is expected to provide significant benefits to investors and market participants by reducing credit, market and liquidity risks and improving efficiency.

For many years the markets operated on a five day settlement cycle (“T+5”) until 1995, when the SEC reduced the settlement cycle from five days to three days.

For more information on this ruling, feel free to contact your local Citrin Cooperman professional.