lunes, 4 de septiembre de 2017

Broker Dealer Transactions Settlement Cycle Reduction from T+3 to T+2

At Last the US is Trending with the World in Equity Markets Settlement Cycles

The Securities and Exchange Commission (SEC) has amended the settlement cycle rule (15c6-1(a)) and the result will be that most of the broker-dealer transactions will be settled in 2 business days instead of 3 business days.

Rule Proposal Date: September 28th of 2017
Rule Effective Date: May 30th of 2017
Compliance Date: September 5th of 2017

The SEC considered that this amendment to the rule will reduce overall market risk by reducing credit, market and liquidity risk.

It is important to consider that in Mexico this amendment resulted in the homogenization of the settlement cycle from T+3 to T+2 as well. In Mexico this announcement was made by the INDEVAL on February 16th of 2017.

The T+3 convention was adopted by the SEC in 1993 and previously was T+5. In Mexico in 2005 it was decided to change the convention from T+2 to T+3 for SIC equities considering that it was important to harmonize the Mexican equities market with the American and Canadian equity markets.

On October 6th of 2014 in Europe the equities settlement cycle was changed from T+3 to T+2.

In general the world is trending to the shortening of equities settlement cycles which in my opinion brings benefits like the reduction if the time in which funds can be recovered when selling shares and also as the SEC mentions liquidity risk will be reduce as well. With all the technology we have I consider that having a settlement cycle is something of the past, in my opinion shares should be settled at the same time the transaction has been made. Of course this will require changing infrastructure and software in financial institutions.

To see the final rule from the SEC go to:

In case of any questions feel free to ask.

Humberto Aguilar

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