T+1 Settlement: A Hard Deadline Approaches, with Some Gaps in Preparedness

During a particularly active period of securities market rulemakings, financial industry reactions to new regulatory proposals often boil down to “too much, too soon.” The U.S. Securities and Exchange Commission’s shortening of the broker-dealer transaction settlement cycle from two days to one day after the trade date (T+2 to T+1) is no exception.

In its final rule of February 2023, the SEC set an implementation date of May 28, 2024, making only a partial concession to some market participants’ pleas for additional months of preparation time. Agency Chair Gary Gensler hailed the benefits of less latency, lower risk and greater liquidity, all contributing to overriding goals of making “our market plumbing more resilient, timely, orderly and efficient.”

Ever since the last such conversion, from T+3 to T+2, in 2017, T+1 was regarded as the logical next step. (Taking a longer view, some observers now say same-day, or T+0, settlement may be feasible, perhaps facilitated by blockchain technology.)

But as the T+1 deadline came into focus early this year, many industry players were not up to speed.

According to Operationalizing T+1,...