SEC Shortens Settlement Cycle

On February 15, 2023, the Securities and Exchange Commission (SEC) adopted final rule changes to shorten the standard settlement cycle for most broker-dealer transactions in securities from two business days after the trade date (T+2) to one business day after the trade date (T+1). The SEC also adopted new rules related to institutional trades by broker-dealers and certain clearing agencies to facilitate efficient processing and amending certain recordkeeping requirements applicable to registered investment advisers.

Background of the T+1 Security Settlement Cycle Rule Proposal

The settlement cycle rule was changed, in part, to address potential vulnerabilities in the U.S. securities market that arose from increased market volatility following the outbreak of the COVID-19 pandemic in March 2020 and the "meme stock frenzy" of 2021. The SEC believes that a shortened settlement cycle can help mitigate credit, market and liquidity risks from unsettled securities