On February 15, 2023, the Securities Exchanges Commission (SEC) adopted Rules amendments to shorten the standard settlement cycle for securities transactions to T+1.
Under the changed and new requirements, brokers-dealers must:
Shorten the standard settlement cycle for most securities transactions from two business days after trade date (T+2) to one (T+1); unless the parties expressly agree otherwise
Shorten the separate standard settlement cycle for firm commitment offerings priced after 4:30 p.m. from four business days after trade date (T+4) to (T+2); unless the parties expressly agree otherwise
Improve the processing of institutional trades through new requirements related to same-day affirmations through relevant written agreements or written policies and procedures (that identify and describe any technology systems, operations, and processes used; set target time frames on trade date for completing the allocation, confirmation, and affirmation for the transaction or describe how a broker-dealer plans to identify and address delays…)
The Canadian Securities Administrators published proposed rule amendments in December 2022 to support the adoption of T+1 . The transition to T+1 is scheduled to occur at the same time in 2024 that the United States moves to T+1 (read our previous article here).
The changes aim at reducing risk, promoting investor protection, and increasing operational and capital efficiency.
The rules will be effective from May 28, 2024.