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By 
May 23, 2024 at 12:52 PM
What You Need to Know
- Firms should get up to speed and perform all necessary testing, Gary Gensler says.
- The move brings the trade settlement cycle back to where it was 100 years ago.
- RIAs should work with their BDs and custodians to ensure they're prepared, says Gail Bernstein of IAA.
Securities and Exchange Commission Chairman Gary Gensler extolled the benefits Thursday of the conversion of the U.S. securities market to a T+1 standard settlement cycle, which takes place Tuesday, but also urged firms to be ready.
During a question and answer session at the Investment Company Institute’s annual meeting in Washington, Gensler urged firms to get up to speed and perform “all your testing.”
Said Gensler: “Shortening the settlement to just one day after, that means an investor selling their stock on Monday gets their cash on Tuesday. And for everyday investors, they already prefund, they already have to have their cash at a broker-dealer,” he said, adding that the change ”lowers the risk in the whole system.”
The move ”gets us back to the settlement cycle from 100 years ago,” he said. “We were at a one-day settlement cycle when mutual funds were first invented in the 1920s, and then we had to expand out, expand out, expand out by the 1960s a whole week [five business days], and now we’ve sort of walked it back.”
Shortening the settlement cycle “will make our market plumbing more resilient, timely and orderly,” Gensler said in a statement.
The move also addresses “one of the four areas the staff recommended the Commission address in response to the GameStop stock events of 2021,” Gensler added.
The SEC adopted the rule amendments and new rules last February.
