Industry Groups Cheer T+1 as a Success

What You Need to Know

In May, the securities transaction settlement cycle was shortened from two business days after the trade date to one
The move has reduced settlement risk and enabled firms to better use their capital, SIFMA, ICI and DTC say.
Moving to T+0 would create new risks and complexities, the groups warn.

The move to T+1, the shortening of the securities transaction settlement cycle from two business days after the trade date to one, was successful, according to a new report released by the Securities Industry and Financial Markets Association, the Investment Company Institute and The Depository Trust & Clearing Corp.

“After more than three years of rigorous and coordinated activities to plan for — and ultimately implement — a shortened settlement cycle, the industry is recognizing reduced settlement risk across the U.S. capital markets,” the T+1 After Action Report states. “Firms are now able to make better use of their capital while promoting financial stability. Ultimately, T+1 has provided the appropriate balance between increasing efficiencies and successfully mitigating risk for the industry.”

The move to T+1 started in late May.

SIFMA, ICI and DTC warn, however, that moving to T+0 (or same-day settlement) is not simply the next step in the process.