SEC Chair Gensler Urges Europeans to Move to T+1 Settlement

SEC Chair Gary Gensler touted the benefits of T+1 settlement, stating that the shorter settlement period will reduce market risk, protect the clearinghouses that stand between buyers and sellers, reduce the amount of margin that clearinghouses must collect, and improve market liquidity.

In an address before the European Commission, Chair Gensler emphasized the increased risk and reduced efficiency caused by slower trade settlements. He noted that a number of markets, including the US Treasury market, the UK Gilt market and other markets (e.g. India and Israel) already settle T+1. He argued that the move to T+1 would address incidents like GameStop, where the clearinghouse's demand for margin from market participants significantly impeded trading. He suggested that had there been a shorter settlement period been in place, not as much clearinghouse market would have been required.

Chair Gensler acknowledged that the Europeans could be more challenged than the United States in shortening the settlement period, given that the Europeans "have dozens of regulated markets and 14 clearinghouses." He stated that he did not find the divergence in settlement periods between Europe and the U.S. troubling, and that "the markets have been able to handle [the mismatches]." Mr. Gensler recommended that currency markets should similarly shorten the settlement period.