The proposed amendment would prohibit a broker-dealer from entering into a contract for the purchase or sale of a security that provides for payment of funds and delivery of securities later than the first business day after the date of the contract, unless otherwise expressly agreed to by the parties at the time of the transaction.
If the proposal is adopted, a T+1 cycle would be implemented by March 31, 2024.
“We welcome the proposal today from the SEC supporting this acceleration of the settlement cycle and look forward to reviewing and commenting as the industry continues it work to follow our roadmap to T+1,” SIFMA President and CEO Kenneth E. Bentsen, Jr. said in statement.
“Our roadmap strives for mid-year 2024 and as we follow the road map the date will become more clear. Importantly, the industry and its regulators need to take the time to get it right and avoid unnecessary disruptions.”
Gensler said he believes the industry even has the capacity today to do same day net settlement, “moving the money and securities in the evening or end of day. The technology exists today for same-day allocation and same day settlement. There are many operational issues outlined in the release. I’m eager to hear back from the public that could help us move to same day net settlement which cold not only lower risk but drive great capital formation,” he added.
“Two recent episodes of increased market volatility—in March 2020 following the outbreak of the COVID-19 pandemic, and in January 2021 following heightened interest in certain “meme” stocks—highlighted potential vulnerabilities in the U.S. securities market that shortening the standard settlement cycle and improving institutional trade processing can mitigate,” the SEC said in a factsheet.