Associations Tout Successful T+1 Change, Warn Against T+0

Industry Groups: T+1 Settlement Contributes to Market Stability

Following the successful implementation of the T+1 settlement cycle in the United States, industry associations have lauded its positive impact on market stability and efficiency. The T+1 settlement cycle, which shortens the settlement period for stock trades from two business days (T+2) to one business day (T+1), was implemented on June 28, 2022.

In a statement, the Securities Industry and Financial Markets Association (SIFMA) praised the T+1 change, stating that it "has contributed to greater market stability and reduced operational risk." SIFMA also noted that the T+1 settlement cycle has "improved the efficiency of the settlement process, reducing costs and systemic risk." The Investment Company Institute (ICI) echoed SIFMA's sentiments, stating that the T+1 settlement cycle has "enhanced the resilience of the financial system" and "reduced the potential for settlement failures."

T+0 Settlement: Concerns Raised Over Systemic Risk

While industry groups have welcomed the T+1 settlement cycle, they have also expressed concerns about the potential risks of moving to a T+0 settlement cycle, where trades would settle on the same day they are executed. The T+0 settlement cycle is currently being considered by the U.S. Securities and Exchange Commission (SEC) as a way to further reduce settlement risk. However, industry groups have warned that T+0 settlement could increase operational risk and market volatility.

In a letter to the SEC, SIFMA outlined its concerns about T+0 settlement, stating that it "could increase operational risk, market volatility, and systemic risk." SIFMA also noted that T+0 settlement could "disadvantage certain market participants, such as retail investors and small broker-dealers." The ICI also expressed concerns about T+0 settlement, stating that it could "create new risks for investors and the financial system."

Conclusion

The T+1 settlement cycle has been a success, contributing to market stability and efficiency. However, industry groups have raised concerns about the potential risks of moving to a T+0 settlement cycle. The SEC is currently considering the T+0 settlement cycle, but it is likely to be a while before a decision is made.