SEC Finalizes Rules to Reduce Risks in Clearance and Settlement
The Securities and Exchange Commission (SEC) adopted rule changes to shorten the standard settlement cycle for most broker-dealer transactions in securities from T+2 to T+1, effective May 28, 2024.
The SEC's rule changes aim to reduce credit, market, and liquidity risks and enhance market efficiency. The new rules require broker-dealers to implement written policies ensuring timely allocation, confirmation, and affirmation of trades by trade date. Central matching service providers must establish policies to support straight-through processing and submit annual reports to the SEC on their progress.
The Securities and Exchange Commission (SEC) adopted rule changes to shorten the standard settlement cycle for most broker-dealer transactions in securities from T+2 to T+1, effective May 28, 2024. The changes aim to reduce credit, market, and liquidity risks and enhance market efficiency. The new rules require broker-dealers to implement written policies ensuring timely allocation, confirmation, and affirmation of trades by trade date. Central matching service providers must establish policies to support straight-through processing and submit annual reports to the SEC on their progress. The changes were endorsed by SEC Chair Gary Gensler as a response to 2021 meme stock volatility. The rule changes are designed to modernize market infrastructure without imposing new financial penalties or enforcement actions. No parties were charged or fined, and no fraud, misconduct, or monetary penalties are involved. The adopting release is published on SEC.gov and will be published in the Federal Register.
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- person central matching service providers
- person compliance date
- person final rules
- person gary gensler
- agency Securities and Exchange Commission
- Securities and Exchange Commission adopted rule changes to shorten the standard settlement cycle for most broker-dealer transactions
- Rule changes benefit investors
- Rule changes reduce credit, market, and liquidity risks in securities transactions
- Gary Gensler said the rulemaking will reduce latency, lower risk, and promote efficiency and greater liquidity in the markets
- Final rules require broker-dealer to enter into written agreements or establish, maintain, and enforce written policies and procedures to ensure completion of allocations, confirmations, and affirmations
- Final rules require registered investment advisers to make and keep records of the allocations, confirmations, and affirmations for certain securities transactions
- Final rules require central matching service providers to establish, implement, maintain, and enforce new policies and procedures to facilitate straight-through processing
- Central matching service providers must submit an annual report to the Commission describing and quantifying progress with respect to straight-through processing
- Final rules become effective 60 days after publication in the Federal Register
- Compliance date is May 28, 2024
The Securities and Exchange Commission today adopted rule changes to shorten the standard settlement cycle for most broker-dealer transactions in securities from two business days after the trade date (T+2) to one (T+1). The final rule is designed to benefit investors and reduce the credit, market, and liquidity risks in securities transactions faced by market participants. “I support this rulemaking because it will reduce latency, lower risk, and promote efficiency as well as greater liquidity in the markets,” said SEC Chair Gary Gensler. “Today’s adoption addresses one of the four areas the staff recommended the Commission address in response to the meme stock events of 2021. Taken together, these amendments will make our market plumbing more resilient, timely, orderly, and efficient.” In addition to shortening the standard settlement cycle, the final rules will improve the processing of institutional trades. Specifically, the final rules will require a broker-dealer to either enter into written agreements or establish, maintain, and enforce written policies and procedures reasonably designed to ensure the completion of allocations, confirmations, and affirmations as soon as technologically practicable and no later than the end of trade date. The final rules also require registered investment advisers to make and keep records of the allocations, confirmations, and affirmations for certain securities transactions. Further, the final rules add a new requirement to facilitate straight-through processing, which applies to certain types of clearing agencies that provide central matching services. The final rules will require central matching service providers to establish, implement, maintain, and enforce new policies and procedures reasonably designed to facilitate straight-through processing and require them to submit an annual report to the Commission that describes and quantifies progress with respect to straight-through processing. The adopting release is published on SEC.gov and will be published in the Federal Register. The final rules will become effective 60 days after publication in the Federal Register. The compliance date for the final rules is May 28, 2024.
The Securities and Exchange Commission today adopted rule changes to shorten the standard settlement cycle for most broker-dealer transactions in securities from two business days after the trade date (T+2) to one (T+1). The final rule is designed to benefit investors and reduce the credit, market, and liquidity risks in securities transactions faced by market participants. “I support this rulemaking because it will reduce latency, lower risk, and promote efficiency as well as greater liquidity in the markets,” said SEC Chair Gary Gensler. “Today’s adoption addresses one of the four areas the staff recommended the Commission address in response to the meme stock events of 2021. Taken together, these amendments will make our market plumbing more resilient, timely, orderly, and efficient.” In addition to shortening the standard settlement cycle, the final rules will improve the processing of institutional trades. Specifically, the final rules will require a broker-dealer to either enter into written agreements or establish, maintain, and enforce written policies and procedures reasonably designed to ensure the completion of allocations, confirmations, and affirmations as soon as technologically practicable and no later than the end of trade date. The final rules also require registered investment advisers to make and keep records of the allocations, confirmations, and affirmations for certain securities transactions. Further, the final rules add a new requirement to facilitate straight-through processing, which applies to certain types of clearing agencies that provide central matching services. The final rules will require central matching service providers to establish, implement, maintain, and enforce new policies and procedures reasonably designed to facilitate straight-through processing and require them to submit an annual report to the Commission that describes and quantifies progress with respect to straight-through processing. The adopting release is published on SEC.gov and will be published in the Federal Register. The final rules will become effective 60 days after publication in the Federal Register. The compliance date for the final rules is May 28, 2024.