Trade Associations Support T+1 Settlement Cycle

Sell-side trade associations (such as SIFMA) and buy-side trade associations (such as the Investment Company Institute ("ICI")) offered recommendations in comments generally supporting the SEC's proposal to accelerate the settlement cycle from two days after the trade date (T+2) to one day after the trade date (T+1). (See previous coverage.)

SIFMA and ICI made a number of suggestions, including:

• moving the compliance date for T+1 to later in 2024;

• eliminating the written agreement requirement in SEA Rule 15c6-2; and

• providing exemptions to deal with particular cases including settlement of foreign securities and carving out security-based swaps from the application of the rule.

Both SIFMA and ICI asserted that T+0 is not practical in the near future, citing issues such as:

• what constitutes "end-of-day";

• reengineering securities processing functions and resolution issues where such a short settlement is not supported by current technology;

• difficulty of facilitating recalls in a short timeframe;

• allocation difficulties;

• pre-funding issues for investment advisers;

• external events such as natural disasters and pandemics that impact the processing of physical securities certificates ("Full Dematerialization");

• an increased number of failed trades;

• cybersecurity issues; and

• an increased competitive disadvantage for smaller participants that may not be able to quickly modernize their "operational infrastructure" relative to larger firms.