The SEC Wednesday approved a rule that shortens the standard settlement cycle for most broker-dealer transactions from three days to two, effective September 5, 2017.
The T+2 rule “is designed to enhance efficiency, reduce risk, and ensure a coordinated and expeditious transition by market participants to a shortened standard settlement cycle,” according to an SEC statement.
“Rarely is an issue as commonsensical or broadly supported as this one,” said SEC Acting Chairman Michael Piwowar in a statement. “It is finally time to say hasta la vista to the antiquated T+3 settlement cycle.”
Piwowar explained that the old T+3 rule hasn’t kept up with improvements in technology, the emergence of new products and increased trading volume at a time when market participants have increased their focus on managing credit, market and liquidity risk.
He said the new rule should decrease market participants’ exposure to unsettled trades and any credit, market and liquidity risk that could follow.