"UNRECOVERABLE: Timeout During Enrichment"

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SECURITIES AND EXCHANGE COMMISSION 

17 CFR Parts 232, 240, and 275 

[Release Nos. 34-96930, IA-6239; File No. S7-05-22] 

RIN 3235-AN02 

Shortening the Securities Transaction Settlement Cycle 

AGENCY:  Securities and Exchange Commission. 

ACTION:  Final rule. 

SUMMARY:  The Securities and Exchange Commission (“Commission”) is adopting rule 

amendments to shorten the standard settlement cycle for most broker-dealer transactions from two 

business days after the trade date (“T+2”) to one business day after the trade date (“T+1”).  In 

addition, the Commission is adopting new rules related to the processing of institutional trades by 

broker-dealers and certain clearing agencies.  The Commission is also amending certain 

recordkeeping requirements applicable to registered investment advisers.   

DATES:  Effective date: May 5, 2023. 

Compliance date:  The applicable compliance dates are discussed in Part VII of this release. 

FOR FURTHER INFORMATION CONTACT:  Matthew Lee, Assistant Director, Susan 

Petersen, Special Counsel, Andrew Shanbrom, Special Counsel, Jesse Capelle, Special Counsel, 

and Mary Ann Callahan, Senior Policy Advisor, at (202) 551-5710, Office of Clearance and 

Settlement, Division of Trading and Markets; Jennifer Porter, Senior Special Counsel, Amy Miller, 

Senior Counsel, and Holly H. Miller, Senior Financial Analyst, at (202) 551-6787, Division of 

Investment Management; U.S. Securities and Exchange Commission, 100 F Street NE, 

Washington, DC 20549-7010. 



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SUPPLEMENTARY INFORMATION:  First, the Commission is amending paragraph (a) of 17 

CFR 240.15c6-1 (“Rule 15c6-1”) under the Securities Exchange Act of 1934 (“Exchange Act”) to 

shorten the standard settlement cycle for most broker-dealer transactions from T+2 to T+1, as 

discussed in Part II.C.1.1  The Commission is also amending paragraph (b) of Rule 15c6-1 to 

exclude security-based swaps from the requirements under paragraph (a) of the rule, and amending 

paragraph (c) of Rule 15c6-1 to shorten the standard settlement cycle for firm commitment 

offerings priced after 4:30 p.m. Eastern Time (“ET”) from four business days after the trade date 

(“T+4”) to T+2, as discussed in Parts II.C.3 and II.C.4 respectively.   

Second, to promote the completion of allocations, confirmations, and affirmations by the 

end of trade date for transactions between broker-dealers and their institutional customers, the 

Commission is adopting a new rule under the Exchange Act at 17 CFR 240.15c6-2 (“Rule 15c6-

2”).  Rule 15c6-2 requires a broker-dealer to either enter into written agreements as specified in the 

rule or establish, maintain, and enforce written policies and procedures reasonably designed to 

address certain objectives related to completing allocations, confirmations, and affirmations as 

soon as technologically practicable and no later than the end of trade date.  The specific 

requirements of the rule are discussed in Part III.C.   

Third, the Commission is amending 17 CFR 275.204-2 (“Rule 204-2”) under the 

Investment Advisers Act of 1940 (“Advisers Act”) to require registered investment advisers to 

make and keep records of the allocations, confirmations, and affirmations for securities 

transactions subject to the requirements of Rule 15c6-2(a), as discussed in Part IV.C.   

                                                 
1  See Part II.A (discussing the types of securities transactions that are currently covered by 

Rule 15c6-1(a)) and Part II.C.1 (discussing the types of securities transactions that will be covered 

by the rule following the rule changes being adopted in this release). 



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Fourth, the Commission is adopting a new rule under the Exchange Act at 17 CFR 

240.17Ad-27 (“Rule 17Ad-27”) to require clearing agencies that provide a central matching 

service (“CMSPs”) to establish, implement, maintain, and enforce policies and procedures 

reasonably designed to facilitate straight-through processing (“STP”) and to file an annual report 

regarding progress with respect to STP.  The specific requirements of the rule are discussed in Part 

V.C. 

Fifth, the Commission is amending 17 CFR part 232 (“Regulation S-T”) to require that a 

CMSP submit the annual report required by Rule 17Ad-27 using the Commission’s Electronic 

Data Gathering, Analysis, and Retrieval system (“EDGAR”) and tag the information in the report 

using the structured (i.e., machine-readable) Inline eXtensible Business Reporting Language 

(“XBRL”).  The Commission discusses this requirement in Part V.C.4. 

Finally, the Commission solicited and received comments regarding the effect of 

shortening the settlement cycle on other Commission requirements, including 17 CFR 242.200 

(“Regulation SHO”), 17 CFR 240.10b-10 (“Rule 10b-10”), the financial responsibility rules 

applicable to broker-dealers, requirements related to prospectus delivery and “access versus 

delivery,” and the impact on self-regulatory organization (“SRO”) rules and operations.  These 

comments are discussed in Part VI. 

 

TABLE OF CONTENTS: 

I. Introduction ........................................................................................................................... 7 

II. Exchange Act Rule 15c6-1 – Standard Settlement Cycle ................................................ 10 

A. Proposed Amendments to Rule 15c6-1............................................................................. 10 

B. Comments ......................................................................................................................... 11 

1. Length of Standard Settlement Cycle and Exchange Act Rule 15c6-1(a) ....................... 11 

2. Securities Excluded from Requirements under Exchange Act Rule 15c6-1 ................... 26 



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3. Proposed Deletion of Rule 15c6-1(c) .............................................................................. 28 

4. Retention of Exchange Act Rule 15c6-1(d) ..................................................................... 30 

5. Exemptive Orders under Exchange Act Rule 15c6-1(b) ................................................. 31 

C. Final Rule and Discussion ................................................................................................ 36 

1. Amendment to Exchange Act Rule 15c6-1(a) ................................................................. 36 

2. Response to Comments Relating to T+0 Settlement ....................................................... 45 

3. Amendments to Exchange Act Rule 15c6-1(b) ............................................................... 47 

4. Amendment to Exchange Act Rule 15c6-1(c) ................................................................. 50 

5. Retention of Existing Exchange Act Rule 15c6-1(d) Unchanged ................................... 54 

6. Exemptive Orders under Exchange Act Rule 15c6-1(b) ................................................. 55 

III. Exchange Act Rule 15c6-2 – Same-Day Affirmation ....................................................... 60 

A. Proposed Rule 15c6-2 ....................................................................................................... 60 

B. Comments ......................................................................................................................... 62 

1. Existing Commercial Incentives for Timely Trade Allocations, Confirmations, and 

Affirmations ............................................................................................................................. 62 

2. Linking Settlement Instructions to Affirmation ............................................................... 63 

3. Definitions of Certain Terms ........................................................................................... 64 

4. Use of Third Parties to Achieve Same-Day Affirmation ................................................. 65 

5. Challenges Associated with Requiring Written Agreements in Support of Increasing 

Same-Day Affirmations ........................................................................................................... 66 

6. End-of-Day Trading, Transactions Across Multiple Time Zones, and Variations in Local 

Holidays as Obstacles to Same-Day Affirmation .................................................................... 70 

7. Alternative Rule Recommended in SIFMA August Letter .............................................. 71 

C. Final Rule and Discussion ................................................................................................ 75 

1. Modifications to Requirement for Written Agreements .................................................. 82 

2. New Policies and Procedures Alternative to Written Agreements Requirement ............ 88 

3. Elements of Reasonably Designed Policies and Procedures ........................................... 94 

4. Use of Defined Terms Other than “Customer” ................................................................ 99 

5. No Requirement to Link Settlement Instructions to Affirmations................................. 100 

IV. Advisers Act Rule 204-2 – Investment Adviser Recordkeeping ................................... 102 

A. Proposed Amendments to Rule 204-2 ............................................................................ 102 

B. Comments ....................................................................................................................... 103 



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C. Final Rule and Discussion .............................................................................................. 104 

V. Exchange Act Rule 17Ad-27 - Requirement for CMSPs to Facilitate Straight-Through 

Processing .................................................................................................................................. 109 

A. Proposed Rule 17Ad-27 .................................................................................................. 110 

B. Comment Letters from DTCC ITP ................................................................................. 112 

1. Amend Policies and Procedures Requirement to Add “Reasonably Designed” To the 

Current Text ........................................................................................................................... 115 

2. Use of ETCs and Manual Processes .............................................................................. 118 

3. Amend the Annual Reporting Requirement to Better Achieve Transparency .............. 121 

4. Support Further Standardization of Industry Protocols and Reference Data ................. 124 

C. Final Rule and Discussion .............................................................................................. 125 

1. New Rule 17Ad-27(a) – Requirement for Policies and Procedures .............................. 127 

2. New Rule 17Ad-27(b) - Annual Report......................................................................... 136 

3. New Rule 17Ad-27(c) – Timing of Filing Annual Report ............................................ 151 

4. New Rule 17Ad-27(d) - Filing Annual Report in EDGAR and Confidentiality Issues 152 

VI. Impact on Certain Commission Rules, Guidance, and SRO Rules .............................. 155 

A. Regulation SHO .............................................................................................................. 156 

B. Delivery of Rule 10b-10 Confirmations and Prospectuses ............................................. 160 

C. Other Prospectus Delivery Matters ................................................................................. 164 

D. Financial Responsibility Rules for Broker-Dealers ........................................................ 166 

E. Changes to SRO Rules and Operations .......................................................................... 169 

VII. Compliance Dates.............................................................................................................. 173 

A. Exchange Act Rule 15c6-1 ............................................................................................. 173 

B. Exchange Act Rule 15c6-1(b): Exclusion for Security-Based Swaps ............................ 181 

C. Exchange Act Rule 15c6-2 and Advisers Act Rule 204-2 .............................................. 181 

D. Exchange Act Rule 17Ad-27 .......................................................................................... 182 

VIII. Economic Analysis .................................................................................................... 183 

A. Background ..................................................................................................................... 184 

B. Baseline ........................................................................................................................... 192 

1. Central Counterparties ................................................................................................... 192 

2. Market Participants – Investors, Broker-Dealers, and Custodians ................................ 195 



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3. Investment Companies and Investment Advisers .......................................................... 201 

4. Current Market for Clearance and Settlement Services ................................................. 203 

C. Analysis of Benefits, Costs, and Impact on Efficiency, Competition, and Capital Formation

 209 

1. Benefits .......................................................................................................................... 209 

2. Costs ............................................................................................................................... 223 

3. Economic Implications through Other Commission Rules ........................................... 232 

4. Effect on Efficiency, Competition, and Capital Formation ........................................... 236 

5. Quantification of Direct and Indirect Effects of a T+1 Settlement Cycle ..................... 243 

D. Consideration of Reasonable Alternatives ...................................................................... 264 

1. Delete 15c6-1(c) to T+2 ................................................................................................. 264 

2. Adopt 17Ad-27 to Require Certain Outcomes............................................................... 265 

3. Adopt Rule Changes to Rule 15c6-2 as recommended by SIFMA’s August Comment 

Letter ...................................................................................................................................... 266 

4. Replace the Written Agreement Requirement in Proposed Rule 15c6-2 with a Principles-

Based Approach ..................................................................................................................... 268 

5. Select a Later Implementation Date for Adoption of the Rule ...................................... 269 

IX. Paperwork Reduction Act ................................................................................................ 270 

A. Advisers Act Rule 204-2 ................................................................................................. 271 

B. Exchange Act Rule 17Ad-27 .......................................................................................... 277 

C. Exchange Act Rule 15c6-2 ............................................................................................. 280 

1. Summary and Proposed Use of Information .................................................................. 280 

2. Respondents ................................................................................................................... 283 

3. Total Initial and Annual Reporting Burdens .................................................................. 284 

4. Collection of Information is Mandatory ........................................................................ 286 

5. Confidentiality ............................................................................................................... 286 

6. Retention Period............................................................................................................. 287 

X. Regulatory Flexibility Act ................................................................................................ 288 

A. Exchange Act Rules 15c6-1 and 15c6-2 ......................................................................... 288 

1. Need for the Rules ......................................................................................................... 288 

2. Summary of Significant Issues Raised by Public Comment ......................................... 289 

3. Description and Estimate of Small Entities ................................................................... 289 



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4. Projected Reporting, Recordkeeping, and Other Compliance Requirements ................ 290 

5. Description of Commission Actions to Minimize Effect on Small Entities .................. 292 

B. Amendment to Advisers Act Rule 204-2 ........................................................................ 293 

1. Need for the Rule Amendment ...................................................................................... 293 

2. Summary of Significant Issues Raised by Public Comment ......................................... 294 

3. Description and Estimate of Small Entities ................................................................... 295 

4. Projected Reporting, Recordkeeping, and Other Compliance Requirements ................ 296 

5. Description of Commission Actions to Minimize Effect on Small Entities .................. 297 

C. Exchange Act Rule 17Ad-27 .......................................................................................... 300 

XI. Other Matters .................................................................................................................... 301 

Statutory Authority .................................................................................................................. 301 

 

I. Introduction 

Promoting the timely, orderly, and efficient settlement of securities transactions has been a 

longstanding Commission objective.2  To advance this objective, the Commission first took steps 

in 1993 to establish a standard requiring the settlement of most securities transactions within three 

business days of trade date (“T+3”), shortening the prevailing practice at the time of settling 

securities transactions within five business days of trade date (“T+5”).3  The Commission has on 

multiple occasions discussed how shortening the settlement cycle can protect investors, reduce risk 

in the financial system, and increase operational efficiency in the securities market.4  In 2017, the 

                                                 
2  See Exchange Act Release No. 94196, Investment Advisers Act Release No. 5957 (Feb. 9, 

2022), 87 FR 10436 (Feb. 24, 2022) (“T+1 Proposing Release”). 

3  See Exchange Act Release No. 33023 (Oct. 6, 1993), 58 FR 52891 (Oct. 13, 1993) (“T+3 

Adopting Release”). 

4  See, e.g., Exchange Act Release No. 31904 (Feb. 23, 1993) 58 FR 11806 (Mar. 1, 1993) 

(“T+3 Proposing Release”); T+3 Adopting Release, supra note 3; Exchange Act Release No. 

78962 (Sept. 28, 2016), 81 FR 69240 (Oct. 5, 2016) (“T+2 Proposing Release”); Exchange Act 



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Commission shortened the standard settlement cycle from T+3 to T+2.5  Now, in part informed by 

episodes in 2020 and 2021 of increased market volatility that highlighted potential vulnerabilities 

in the U.S. securities market,6 the Commission believes that shortening the settlement cycle from 

T+2 to T+1 can promote investor protection, reduce risk, and increase operational and capital 

efficiency.7   

As discussed in the T+1 Proposing Release,8 the Commission believes that substantial 

progress has been made toward identifying the technological and operational changes that are 

necessary to establish a T+1 settlement cycle, including the industry-level changes that would be 

necessary to transition from a T+2 standard to a T+1 standard settlement cycle.  The Commission 

also discussed how additional regulatory steps were necessary to improve the processing of 

institutional transactions, advancing two other longstanding objectives shared by the Commission 

and the securities industry: the completion of trade allocations, confirmations, and affirmations on 

trade date (an objective often referred to as “same-day affirmation”) and the straight-through 

processing of securities transactions.9  Accordingly, the Commission proposed a combination of 

                                                 

Release No. 80295 (Mar. 22, 2017), 82 FR 15564, 15601 (Mar. 29, 2017) (“T+2 Adopting 

Release”); T+1 Proposing Release, supra note 2. 

5  See T+2 Adopting Release, supra note 4. 

6  See T+1 Proposing Release, supra note 2, at 10444 n.61. 

7  As stated in the T+1 Proposing Release, the Investor Advisory Committee recommended in 

2015 that the Commission pursue T+1 (rather than T+2), noting that retail investors would 

significantly benefit from a T+1 standard settlement cycle.  See id. at 10439 & nn.28–29. 

8  See id. at 10447. 

9  As discussed in the T+1 Proposing Release, the Commission uses “straight-through 

processing,” or “STP,” to refer generally to processes that allow for the automation of the entire 



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rule amendments and new rules to shorten the standard settlement cycle to T+1, establish new 

requirements for broker-dealers and investment advisers designed to advance the same-day 

affirmation objective, and to establish requirements for CMSPs to promote straight-through 

processing.10   

The Commission received many comments in response to the T+1 Proposing Release.11  

Having considered the comments received, the Commission is adopting the proposed new rules 

and rule amendments with modifications, as discussed further below.  Specifically, in Part II, the 

Commission discusses the comments received regarding the proposed amendments to Rule 15c6-1 

under the Exchange Act, and modifications made in response to the comments.  In Part III, the 

Commission discusses the comments received regarding proposed Rule 15c6-2 under the 

Exchange Act, and modifications made in response to the comments.  In Part IV, the Commission 

discusses the comments received regarding the proposed amendment to Rule 204-2 under the 

Advisers Act, and modifications made in response to the comments.  In Part V, the Commission 

discusses the comments received regarding proposed Rule 17Ad-27 under the Exchange Act, and 

modifications made in response to the comments.  In Part VI, the Commission discusses the 

comments received regarding the effect of shortening the settlement cycle on other Commission 

requirements, including Regulation SHO, Rule 10b-10 under the Exchange Act, the financial 

responsibility rules applicable to broker-dealers, requirements related to prospectus delivery and 

“access versus delivery,” and the impact on SRO rules and operations. 

                                                 

trade process from trade execution through settlement without manual intervention.  See id. at 

10458; see also infra note 323 and accompanying text. 

10  See T+1 Proposing Release, supra note 2, at 10436.  

11  Copies of all comment letters received by the Commission are available at 

https://www.sec.gov/comments/s7-05-22/s70522.htm. 

https://www.sec.gov/comments/s7-05-22/s70522.htm


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II. Exchange Act Rule 15c6-1 – Standard Settlement Cycle 

A. Proposed Amendments to Rule 15c6-1 

In the T+1 Proposing Release, the Commission proposed to amend Rule 15c6-1(a) to 

prohibit broker-dealers from effecting or entering into a contract for the purchase or sale of a 

security (other than an exempted security, a government security, a municipal security, commercial 

paper, bankers’ acceptances, or commercial bills) 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.12  The proposed amendment to 

Rule 15c6-1(a) would shorten the length of the standard settlement cycle for securities transactions 

covered by the existing rule from T+2 to T+1.13   

In addition to the proposed amendment to paragraph (a) of Rule 15c6-1, the Commission 

proposed to delete paragraph (c) of the rule,14 which would, in conjunction with the proposed 

amendment to paragraph (a), establish a T+1 standard settlement cycle for firm commitment 

offerings priced after 4:30 p.m. ET.  However, the so-called “override” provisions in paragraphs 

(a) and (d) of Rule 15c6-1 would continue to allow contracts currently covered by paragraph (c) to 

                                                 
12  See T+1 Proposing Release, supra note 2, at 10447.  

13  As explained in the T+1 Proposing Release, existing Rule 15c6-1(a) covers contracts for 

the purchase or sale of all types of securities except for the excluded securities enumerated in 

paragraph (a)(1) of the rule.  See id. at 10446.  The definition of the term “security” in section 

3(a)(10) of the Exchange Act covers, among others, equities, corporate bonds, unit investment 

trusts (“UITs”), mutual funds, exchange-traded funds (“ETFs”), American depository receipts 

(“ADRs”), security-based swaps, and options.  See id. at 10446 n.83.  Application of Rule 15c6-

1(a) extends to the purchase and sale of securities issued by investment companies (including 

mutual funds), private-label mortgage-backed securities, and limited partnership interests that are 

listed on an exchange.  See id. at 10446 nn.84–85. 

14  See id. at 10448–49. 



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provide for settlement on a timeframe other than T+1 if the parties expressly agree to a different 

settlement timeframe at the time of the transaction. 

In addition to proposing to delete paragraph (c) of Rule 15c6-1, the Commission proposed 

conforming technical amendments to paragraphs (a), (b), and (d) of the rule. Specifically, the 

Commission proposed to delete all references to paragraph (c) of Rule 15c6-1 that currently appear 

in paragraphs (a), (b), and (d) of the rule.15 

B. Comments 

1. Length of Standard Settlement Cycle and Exchange Act Rule 15c6-1(a) 

In response to the T+1 Proposing Release, the Commission received numerous comment 

letters supporting a shorter settlement cycle for securities transactions.16  Many of these comment 

                                                 
15  See id. at 10449. 

16  See, e.g., letters from Jaime N. Calaf (Feb. 9, 2022) (“Calaf Letter”); James Kelley (Feb. 9, 

2022) (“Kelley Letter”); Kyle (Feb. 9, 2022) (“Kyle 1 Letter”); Curtis Robinson (Feb. 9, 2022) 

(“Robinson 1 Letter”); Ryan, Business Owner (Feb. 9, 2022) (“Ryan 1 Letter”); L. Martin Stewart 

(Feb. 9, 2022) (“Stewart Letter”); Anthony LaBree (Feb. 10, 2022) (“LaBree Letter”); Nicolas 

Zach (Feb. 13, 2022) (“Zach Letter”); Richard Stauts (Feb. 14, 2022) (“Stauts Letter”); PressPage 

Entertainment Inc. (Feb. 15, 2022) (“PressPage Letter”); Peter Duggan, President, Securities 

Transfer Association (Apr. 1, 2022), at 2 (“STA Letter”); Kirsten Wegner, Chief Executive 

Officer, Modern Markets Initiative (Apr. 4, 2022), at 1 (“MMI Letter”); Hope Jarkowski, General 

Counsel, NYSE Group, Inc. (Apr. 6, 2022), at 1 (“NYSE Letter”); Keith Evans, Executive 

Director, Canadian Capital Markets Association (Apr. 9, 2022), at 1 (“CCMA April Letter”); 

Steven Wager, Chair, Americas Focus Committee, Association of Global Custodians (Apr. 11, 

2022), at 3 (“AGC April Letter”); Stephen Hall, Legal Director and Securities Specialist, and Jason 

Grimes, Senior Counsel, Better Markets, Inc. (Apr. 11, 2022), at 1 (“Better Markets Letter”); Paul 

Conn, President, Global Capital Markets, and Claire Corney, Senior Managing Director, 

Regulatory & Market Initiatives, Global Capital Markets, Computershare Limited (Apr. 11, 2022), 

at 1 (“Computershare Letter”); Birgitta Siegel, Esq., Adjunct Professor of Law, Cornell Law 

School Securities Law Clinic (Apr. 11, 2022), at 1 (“Cornell Law Letter”); Murray Pozmanter, 

Managing Director, Head of Clearing Agency Services & Global Business Operations, The 

Depository Trust and Clearing Corporation (Apr. 11, 2022), at 2 (“DTCC Letter”); Joanna Mallers, 

Secretary, FIA Principal Traders Group (Apr. 11, 2022), at 1 (“FIA PTG Letter”); Robert Adams, 

Chief Operations Officer, National Financial Services LLC (Apr. 11, 2022), at 1 (“Fidelity 

Letter”); Gail C. Bernstein, General Counsel, Investment Adviser Association (Apr. 11, 2022), at 1 



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letters supported shortening the standard settlement cycle to T+1.17  Several comment letters that 

supported the Commission’s proposal to shorten the settlement cycle to T+1 also supported 

shortening the settlement cycle to “T+0” or instantaneous settlement.18  Other comment letters 

                                                 

(“IAA April Letter”); Susan Olson, General Counsel, and Joanne Kane, Chief Industry Operations 

Officer, Investment Company Institute (Apr. 11, 2022), at 1 (“ICI Letter”); Jack Rando, Managing 

Director, The Investment Industry Association of Canada (Apr. 11, 2022), at 1 (“IIAC Letter”); 

Jennifer Han, Executive Vice President, Chief Counsel & Head of Regulatory Affairs, Managed 

Funds Association (Apr. 11, 2022), at 1 (“MFA Letter”); Joseph Kamnik, Chief Regulatory 

Counsel, The Options Clearing Corporation (Apr. 11, 2022), at 1 (“OCC Letter”); Fran Garritt, 

Director, Securities Lending & Market Risk, and Mark Whipple, Chairman, Committee on 

Securities Lending, Securities Lending Council of the Risk Management Association (Apr. 11, 

2022), at 3 (“RMA Letter”); Joseph Barry, Senior Vice President and Global Head of Regulatory, 

Industry and Government Affairs, State Street Corporation (Apr. 11, 2022), at 3 (“State Street 

Letter”); Robert McBey, Chief Executive Officer, Wilson-Davis & Co., Inc. (Apr. 14, 2022), at 1 

(“Wilson-Davis Letter”); Thomas M. Merritt, Deputy General Counsel, Virtu Financial, Inc. (Apr. 

11, 2022), at 1 (“Virtu Financial Letter”); Christopher A. Iacovella, Chief Executive Officer, 

American Securities Association (Apr. 12, 2022), at 1 (“ASA Letter”); Thomas Price, Managing 

Director, and Lindsey Weber Keljo, Head - Asset Management Group, Securities Industry and 

Financial Markets Association (Apr. 13, 2022), at 1–2 (“SIFMA April Letter”).   

17  See, e.g., AGC April Letter, supra note 16, at 3; ASA Letter, supra note 16, at 1; letter 

from Jaiden Baker (Feb. 19, 2022) (“Baker Letter”); Better Markets Letter, supra note 16, at 1; 

CCMA April Letter, supra note 16, at 1; Computershare Letter, supra note 16, at 1; Cornell Law 

Letter, supra note 16, at 2; DTCC Letter, supra note 16, at 2; FIA PTG Letter, supra note 16, at 1; 

Fidelity Letter, supra note 16, at 2; IAA April Letter, supra note 16, at 1; ICI Letter, supra note 16, 

at 1; IIAC Letter, supra note 16, at 1; Kyle 1 Letter, supra note 16, at 1; LaBree Letter, supra note 

16, at 1; MFA Letter, supra note 16, at 2; MMI Letter, supra note 16, at 1; NYSE Letter, supra 

note 16, at 1; OCC Letter, supra note 16, at 2; PressPage Letter, supra note 16, at 1; RMA Letter, 

supra note 16, at 3; Robinson 1 Letter, supra note 16, at 1; Ryan 1 Letter, supra note 16, at 1; 

SIFMA April Letter, supra note 16, at 3; STA Letter, supra note 16, at 2; State Street Letter, supra 

note 16, at 3; Stauts Letter, supra note 16, at 1; Stewart Letter, supra note 16, at 1; Wilson-Davis 

Letter, supra note 16, at 1; letter from Rebecca Womack (Feb. 18, 2022) (“Womack Letter”); Virtu 

Financial Letter, supra note 16, at 3; Zach Letter, supra note 16, at 1.  

18  See, e.g., Calaf Letter, supra note 16; letter from Degen Mahdere (Feb. 17, 2022) 

(“Mahdere Letter”); letter from Adam Rathbone (Feb. 17, 2022) (“Rathbone Letter”); letter from 

Hunter Gage Seeton (Feb. 18, 2022) (“Seeton Letter”); letter from Sam Oakes (Feb. 19, 2022) 

(“Oakes Letter”); letter from Matthew Risse (Feb. 19, 2022) (“Risse Letter”); letter from Ryan 

Webster (Oct. 31, 2022) (“Webster Letter”).  Several of the comment letters referred to “T+0” 



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were silent as to the Commission’s proposal to shorten the settlement cycle to T+1, but expressed 

the view that a T+0 settlement cycle should be implemented either immediately or as soon as 

possible.19 

Commenters supporting the Commission’s proposal to shorten the standard settlement 

cycle to T+1 cited a number of benefits that a T+1 settlement cycle would deliver to market 

participants.  For example, comment letters supporting a move to T+1 stated that shortening the 

settlement cycle to T+1 would result in reductions to existing levels of risk to central 

counterparties (“CCPs”) and market participants (including credit, market and liquidity risk), 20 

lower margin requirements,21 improved capital liquidity,22 improvements to post-trade processing 

                                                 

without explaining that term.  However, the T+1 Proposing Release defines T+0 as settlement no 

later than the end of trade date.  See T+1 Proposing Release, supra note 2, at 10436, 10438. 

19  See, e.g., letter from Mark C. (Feb. 19, 2022) (“Mark C. Letter”); letter from Saul Nevarez 

(Feb. 19, 2022) (“Nevarez Letter”); letter from Clinton Lawler (Feb. 19, 2022) (“Lawler Letter”); 

letter from Alex McKay (Feb. 19, 2022) (“McKay Letter”). 

20  See, e.g., DTCC Letter, supra note 16, at 2–3; Fidelity Letter, supra note 16, at 2; IAA 

April Letter, supra note 16, at 1; ICI Letter, supra note 16, at 1, 3; MFA Letter, supra note 16, at 

1; OCC Letter, supra note 16, at 2; RMA Letter, supra note 16, at 3; SIFMA April Letter, supra 

note 16, at 2; State Street Letter, supra note 16, at 4. 

21  See, e.g., Cornell Law Letter, supra note 16, at 3; DTCC Letter, supra note 16, at 2–3; 

Fidelity Letter, supra note 16, at 2; MMI Letter, supra note 16, at 2; State Street Letter, supra note 

16, at 4. 

22  See, e.g., DTCC Letter, supra note 16, at 2–3; MMI Letter, supra note 16, at 2; State Street 

Letter, supra note 16, at 4. 



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and operational efficiency,23 increased financial stability,24 and reduced systemic risk in the 

financial system.25  

In addition, several comment letters stated that shortening the settlement cycle to T+1 

would benefit retail investors.26  For example, one commenter stated that retail investors would 

benefit from a move to T+1 through increased certainty, safety, and security in the financial 

system; access to the proceeds, or purchases, of their securities transactions a day earlier; and 

aligning the settlement cycles for ETF transactions (which now settle on T+2) with the settlement 

cycle for mutual funds (which typically settle on T+1).27  Another commenter similarly stated that 

investors would benefit from earlier access to the proceeds of their securities transactions if the 

settlement cycle is shortened to T+1.28 

                                                 
23  See, e.g., Cornell Law Letter, supra note 16, at 3; DTCC Letter, supra note 16, at 2–3; IAA 

April Letter, supra note 16, at 1; RMA Letter, supra note 16, at 3; State Street Letter, supra note 

16, at 4. 

24  See, e.g., ICI Letter, supra note 16, at 1; MMI Letter, supra note 16, at 2. 

25  See, e.g., Fidelity Letter, supra note 16, at 2; MFA Letter, supra note 16, at 1; MMI Letter, 

supra note 16, at 2; RMA Letter, supra note 16, at 3; 

26  See, e.g., Better Markets Letter, supra note 16, at 2–3; Fidelity Letter, supra note 16, at 2; 

IIAC Letter, supra note 16, at 1; LaBree Letter, supra note 16, at 1; MMI Letter, supra note 16, at 

2; Robinson 1 Letter, supra note 16, at 1; Ryan 1 Letter, supra note 16, at 1; Stauts Letter, supra 

note 16, at 1; letter from Tate Winter (Feb. 17, 2022) (“Winter Letter”).  

27  See Fidelity Letter, supra note 16, at 2; see also ICI Letter, supra note 16, at 3 (stating that 

a T+1 settlement cycle would enhance funds’ cash and liquidity management; given that fund 

shares typically settle on a T+1 basis, a shorter settlement cycle would help align the settlement of 

a fund’s portfolio securities and the settlement of its shares). 

28  See Cornell Law Letter, supra note 16, at 3 (“If [the Commission’s T+1 proposal] were 

adopted, buyers and sellers would have access to their proceeds an entire day earlier relative to the 

T+2 settlement cycle.  If the public comments submitted to date are any indication, this is of 

paramount concern to the lay investor.”). 



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The Commission also received comment letters that raised concerns regarding the 

Commission’s proposal to shorten the standard settlement cycle to T+1.29  These commenters, 

some of which were supportive of shortening the settlement cycle as a general matter, raised 

concerns about the prospective impact of mismatched settlement cycles across global markets that 

would result if the settlement cycle in the U.S. is shortened to T+1 without global coordination and 

harmonization of settlement cycles.30  For example, a comment letter submitted by an industry 

association representing the alternative investment industry stated that the T+1 Proposing Release 

“raises considerable risks for asset managers with primary or significant exposure to markets that 

will remain at T+2.”31  The comment letter further stated that “[i]n absence of further global 

coordination, the resulting market misalignment from the move to T+1 poses a number of harmful 

unintended consequences to these asset managers, their counterparties and overall market health 

                                                 
29  See, e.g., letters from Jiří Król, Deputy CEO, Global Head of Government Affairs, 

Alternative Investment Management Association (Apr. 11, 2022), at 2 (“AIMA Letter”) 

(commending the Commission’s intended efforts to reduce risk in the U.S. settlement cycle and 

improve efficiency in post-trade processing); Kristin Swenton Hochstein et al., International 

Securities Association for Institutional Trade Communication (Apr. 8, 2022), at 2–7 (“ISITC 

Letter”) (not advocating for or against shortening the U.S. settlement cycle to T+1, but identifying 

certain challenges associated with moving to T+1); Scott Pintoff, General Counsel, MarketAxess 

Holdings Inc. (Apr. 11, 2022), at 1 (“MarketAxess Letter”) (generally favoring a shortening of the 

standard settlement cycle for most bond transactions from T+2 to T+1); State Street Letter, supra 

note 16, at 4; Virtu Financial Letter, supra note 16, at 2–3. 

30  Several of the comment letters that raised concerns regarding the Commission’s proposal to 

shorten the settlement cycle to T+1 also raised concerns regarding proposed Rule 15c6-2.  Those 

comments are discussed separately in Part III.B below. 

31  AIMA Letter, supra note 29, at 2.  The AIMA Letter also cites to a letter AIMA submitted 

to Commission staff on October 27, 2021, which further details the concerns raised in the AIMA 

Letter.  AIMA’s 2021 submission to Commission staff was resubmitted to the Commission as an 

Annex to the AIMA Letter. 



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and stability.”32  The commenter’s letter references specifically “misalignment concerns” relating 

to FX settlement risk,33 international banking and coordination issues, and collateral/liquidity 

risk.34   

With respect to FX settlement risk, the commenter stated that accelerating the U.S. 

settlement cycle to T+1 raises the risk that transaction funding dependent on FX “may not occur on 

time.”35  The commenter further stated that alternative sources of funding for U.S. trades on T+1 

may therefore need to be in place, which may increase costs and create allocation inefficiencies 

that may dissuade participation in U.S. markets.36   

                                                 
32  Id. 

33  The comment letters that use the term “FX” do not define the term, but “FX” is commonly 

used to refer to foreign currency exchange.  Market participants often rely on FX trades executed 

in the “spot” markets in order to fund securities transactions in the U.S. markets that settle in U.S. 

dollars, and the settlement cycle for spot FX transactions is typically T+2.  However, spot 

transactions in certain FX pairs (e.g., U.S. dollars vs. Canadian dollars) settle on T+1. 

34  AIMA Letter, supra note 29, at 5–6.  The commenter explained its concerns relating to 

international banking and coordination issues by stating that “the rigid deadlines of banking 

systems pose a significant risk, as do simple time zone or calendar differences that otherwise can 

be accommodated by a T+2 settlement cycle.”  Id. at 5.  The commenter further stated that foreign 

banking deadlines and cutoff times for transaction processing in related markets must be carefully 

re-examined to ensure activity can be harmonized in an accelerated U.S. settlement framework.  

Id. 

35  Id.  The commenter further stated that settlement of FX transactions generally occurs on 

T+2, “although the period of irrevocability—between the unilateral cancellation deadline for the 

sold currency and actual receipt of the bought currency—can extend well beyond T+1.”  Id. 

36  Id.  The commenter further stated that “unilateral cancelation deadlines may need to be 

considered” for FX transactions.  Id.  The length of such deadlines may impact when an FX 

transaction can be settled, in turn affecting the time it may take to secure funding for a securities 

transaction.  The T+1 Report also states that such unilateral cancelation deadlines may need to be 

considered, and discusses how these deadlines may impact asset managers if the settlement cycle 

for securities transactions is shortened to T+1.  See T+1 Report, infra note 61, at 17.  The term 

“unilateral cancelation deadline” generally refers to the point in time after which a bank is no 

longer guaranteed that it can recall, rescind or cancel (with certainty) a previously submitted 



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With respect to the commenter’s concerns regarding collateral and liquidity risks, the 

commenter stated that the above-described FX and coordination issues threaten asset managers’ 

ability to ensure funding is available in time to settle their U.S. trades on T+1.37  According to the 

commenter, uncertainty regarding collateral for settlement may mean that foreign asset managers 

would need to redeem money market funds to meet their financing needs, or forego transacting in 

U.S. markets in order to comply with the accelerated settlement requirements.38  Ultimately, the 

commenter stated, trade financing issues will lead to both significantly lower trading volume and 

lower overall liquidity, which pose a very real risk to overall market health and stability.39 

Another commenter was concerned that there may not be sufficient time for investment 

advisers to match foreign currency amounts to settle all trades on T+1, citing various factors that 

would make it costly and difficult for investment advisers to execute FX after the U.S. market 

close.40  This commenter also stated that because FX transactions largely settle on a T+2 basis, 

                                                 

payment instruction.  This deadline varies depending on the currency pair being settled, 

correspondent payment system practices, and operational, service and legal arrangements.  See 

Bank for International Settlements, SUPERVISORY GUIDANCE FOR MANAGING RISKS ASSOCIATED 

WITH THE SETTLEMENT OF FOREIGN EXCHANGE TRANSACTIONS (Feb. 2013), available at 

https://www.bis.org/publ/bcbs241.pdf.  See infra notes 617–619 and accompanying text (further 

discussing the anticipated economic effects resulting from mismatched settlement cycles). 

37  AIMA Letter, supra note 29, at 5.    

38  Id. 

39  Id. 

40  See IAA October Letter, infra note 222, at 3 (observing that there are circumstances in 

which a U.S.-based FX trading desk will switch over to its Asia-based FX trading desk upon the 

U.S. market close to provide ongoing liquidity, but not on Friday evenings, and certain asset 

owners and managers, including Sovereign Wealth Funds, only trade from their country of 

domicile). 

https://www.bis.org/publ/bcbs241.pdf


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market participants that seek to fund a cross-border securities transaction with the proceeds of an 

FX transaction would be required to settle the securities transaction before the proceeds of the FX 

transaction become available and pre-fund these securities transactions, which would potentially 

adversely impact client performance and increase operating and settlement risk for advisers.  The 

commenter said that while both domestic and internationally based investment advisers would be 

impacted by these issues, non-U.S.-based investment advisers would face additional expenses 

because they would need to set up an FX trading and settlement presence in the U.S., or add staff 

abroad to create, execute, and settle FX transactions to meet a T+1 timeline.41 

Another commenter that operates a broker-dealer and an electronic trading platform for 

corporate bonds stated that it had “serious reservations regarding the impact the proposed 

amendments to Rule 15c6-1(a) and Rule 15c6-2 will have on cross border trading unless, and until, 

other global financial markets also shorten their settlement cycle.”42  Specifically, the commenter 

stated that if the U.S. settlement cycle is shortened to T+1 while other major global financial 

centers remain on a T+2 settlement cycle, “there will be increased operational cost and significant 

settlement risks associated with multi-leg cross border transactions.”43   

The commenter further stated that it expects mismatched settlement cycles would result in 

increased financing costs associated with transactions in which a U.S. market participant is selling 

                                                 
41  Id. at 4 (suggesting certain actions the Commission could take to reduce disruption in FX 

markets, such as by (i) working with other regulators and market participants to support the move 

to T+1 by, among other things, modifying the FX and equity trading day(s) in the U.S., and (ii) 

“allow[ing] for a mismatch of FX settlement dates as a valid reason for T+2 settlement 

arrangements without it breaching an investment adviser’s best execution obligation”). 

42  MarketAxess Letter, supra note 29, at 1.  

43  Id. at 2. 



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to a cross-border participant because “we will be forced to receive (and pay for) a securities 

position on T+1 for the U.S. leg, but generally be unable to onward deliver the position on the 

foreign leg until T+2.”44  In this scenario, the commenter stated that it would need to fund the 

position until the next settlement cycle.45   

Additionally, the commenter stated its expectation that there will be a significant number of 

settlement fails when the U.S. participant is buying bonds and the cross-border participant is 

unable to deliver the bonds until T+2.46  The commenter further argued that if the Commission’s 

T+1 proposal is adopted and other financial markets do not move in lock-step, the increase in 

financing costs and settlement fails in connection with cross-border transactions may force broker-

dealers to decrease or cease offering cross-border services to their clients.47  Lastly, the commenter 

argued that any decrease or cessation of cross-border trading ultimately will reduce liquidity for 

U.S. investors.48  For these reasons, the commenter encouraged the Commission to work with 

international regulators to coordinate a move to T+1 settlement on a global basis if possible.49     

                                                 
44  Id. 

45  Id. 

46  Id. 

47  Id. 

48  Id. 

49  Id. 



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Another commenter stated that there may not be sufficient time for investment advisers to 

match foreign currency amounts to settle all trades on T+1.50  In particular the comment 

highlighted the lack of time between the closure of the equity markets (at 4:00 p.m. ET in the U.S.) 

and the time when U.S.-based FX trading desks close for the evening (usually an hour or so 

later).51  The commenter also discussed the reasons it believed that “Far East” trading desks may 

not seamlessly take over after the close of U.S.-based FX trading desks.52  According to the 

commenter, these issues may impact both domestic and internationally based investment 

advisers.53  However, in the commenter’s view, non-U.S. based investment advisers will face 

additional expenses, as they will either be forced to set up an FX trading and settlement presence 

in North America (or Asia) or add staff abroad to create, execute, and settle FX transactions to 

meet a T+1 timeline.54 

Finally, the commenter suggested certain “options” for actions that could be taken to 

reduce disruption in the FX markets.  While recognizing that some of these options would be 

“troublesome to implement,” the commenter stated that two would be the most effective in 

alleviating the commenter’s concerns.55  First, the commenter suggested that appropriate market 

                                                 
50  Letter from Suzanne Quinn, Head of North America Compliance, Ballie Gifford Overseas 

Limited (Nov. 17, 2022), at 1 (“Ballie Gifford Letter”). 

51  Id. 

52  Id. at 1–2. 

53  Id. at 2. 

54  Id. 

55  Id.Conformed to Federal Register version 

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authorities mandate a change in “the official equity trading day” for U.S. markets to close one hour 

earlier, at 3:00 p.m. rather than 4:00 p.m. ET, which would provide firms more time to match 

trades and ensure the settlement FX is in place for the following day, without negatively impacting 

liquidity and trading volume.56  Second, the commenter stated that the Commission could allow for 

a mismatch of FX settlement dates as a valid reason for T+2 settlement arrangements “without 

[such arrangements] breaching an investment adviser’s best execution obligation.”57 

In the proposing release, the Commission asked commenters whether efforts to shorten the 

standard settlement cycle to T+1 is a logical step on the path to T+0 settlement, or would moving 

to a T+1 standard settlement cycle require investments or processes that would be outdated or 

unnecessary in a T+0 environment.58  Although no commenters discussed whether moving to a 

T+1 standard settlement cycle would require investments or processes that would be outdated or 

unnecessary in a T+0 environment, as discussed below, the Commission received numerous 

comments relating to T+0 settlement.   

Several of the commenters that supported moving to a T+1 settlement cycle also stated that 

moving to a T+0 settlement cycle, or instantaneous settlement, is either not achievable or not 

practical in the near term.59  These commenters cited several challenges associated with a 

                                                 
56  Id. 

57  Id.; see also supra note 41 and accompanying text (discussing the same, including other 

related recommendations from the IAA).  

58  See T+1 Proposing Release, supra note 2, at 10450. 

59  See, e.g., DTCC Letter, supra note 16, at 6 (“[W]e do not believe the industry is currently 

ready to move to a T+0 standard settlement cycle . . .”); FIA PTG Letter, supra note 16, at 1–2; 

MMI Letter, supra note 16, at 3 (expressing commenter’s concern that a move to T+0 would be 

potentially infeasible in the short term); NYSE Group Letter, supra note 16, at 2 (expressing 

commenter’s view that T+0 settlement cycle is not practical in the near term); OCC Letter, supra 



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prospective move to a T+0 settlement cycle, 60 including in the case of several comment letters, 

many of the same challenges that were cited in the “T+1 Report,” which the Commission 

discussed in the T+1 Proposing Release.61  For example, one commenter stated that moving to T+0 

“would require the redesign of many securities processing functions, including [i]nstitutional 

[t]rade [p]rocessing, ETFs processing, options, margin investing, securities lending, FX markets, 

and global settlements across jurisdictions to meet the regulatory, operational, and contractual 

requirements.”62  Another commenter stated that: 

[I]mplementing T+0 as the required standard settlement cycle across 

the industry remains a significant undertaking that would require 

foundational changes to the way securities trade and settle today.  

                                                 

note 16, at 4 (“OCC agrees with the consensus view reflected in [the T+1 Report] that same-day 

settlement is not achievable in the short-term, and that moving towards shortening the settlement 

cycle to T+0 would require an overhaul of the U.S. clearing and settlement infrastructure.”); 

SIFMA April Letter, supra note 16, at 15–20 (expressing commenter’s view that T+0 settlement is 

not practical in the near term); Virtu Financial Letter, supra note 16, at 3–4 (“T+0 [settlement] is 

not feasible or attainable at this time.”). 

60  See, e.g., DTCC Letter, supra note 16, at 5; NYSE Group Letter, supra note 16, at 2 (“T+0 

settlement cycle would pose significant challenges to the industry, including eliminating the 

benefits of netting for settling trades, requiring that every transaction be funded instantly and 

individually, and additional complexities for foreign investors, options, ETFs and futures.”); 

SIFMA April Letter, supra note 16, at 16 (describing numerous challenges associated with moving 

to T+0 settlement); Virtu Financial Letter, supra note 16, at 3–4 (describing various challenges 

associated with moving to T+0 settlement); see also State Street Letter, supra note 16, at 5–10 

(providing high-level observations on the implications of same-day settlement for various 

operational processes and investment products which are central to the custody bank business 

model). 

61  See T+1 Proposing Release, supra note 2, at 10438, 10445 (citing to Deloitte & Touche 

LLP, the Depository Trust and Clearing Corporation, the Investment Company Institute, and 

Securities Industry and Financial Markets Association, Accelerating the U.S. Securities Settlement 

Cycle to T+1 (Dec. 1, 2021) (“T+1 Report”), https://www.sifma.org/wp-

content/uploads/2021/12/Accelerating-the-U.S.-Securities-Settlement-Cycle-to-T1-December-1-

2021.pdf). 

62  SIFMA April Letter, supra note 16, at 16 (quoting T+1 Report, supra note 61). 

https://www.sifma.org/wp-content/uploads/2021/12/Accelerating-the-U.S.-Securities-Settlement-Cycle-to-T1-December-1-2021.pdf
https://www.sifma.org/wp-content/uploads/2021/12/Accelerating-the-U.S.-Securities-Settlement-Cycle-to-T1-December-1-2021.pdf
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Moreover, moving the entire industry to a T+0 standard settlement 

cycle would necessitate significant changes in industry conventions 

and major investments in automating processes and technology that 

will greatly exceed similar investments needed for T+1.63 

Another commenter argued that moving to T+0 would require a “rewrite” of not only the 

current clearing and settlement infrastructure, but also the associated banking, securities custodian, 

and money market systems that are critical components of the clearing and settlement ecosystem.64  

This commenter further stated that moving to T+0 settlement would potentially require 

implementation of real-time currency movements during hours of the day at which such processes 

are not feasible.65  In particular, the commenter argued, “[n]ot only would this require major 

system upgrades, but as critical components of the settlement process, banks, wire systems, 

custodians, lenders, and money market funds, along with related staff, would need to be available 

well into the evening.”66 

Another commenter stated that T+0 settlement would present logistical concerns around 

borrowing and lending and would likely introduce challenges for batch processing.67  More 

specifically, this commenter stated that while it is possible that trades could be netted throughout 

the day, it is unlikely that batch processing could capture all trades by the market close, and such 

                                                 
63  DTCC Letter, supra note 16, at 5 

64  FIA PTG Letter, supra note 16, at 1. 

65  Id. 

66  Id. at 1–2. 

67  See Virtu Financial Letter, supra note 16, at 3–4. 



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netting could lead to multiple intraday margin calls by clearing agencies.68  The same commenter 

stated that in a T+0 settlement environment it would be very difficult for investment advisers to 

process real-time trade allocations.69  Additionally, the commenter argued that prime brokers 

would be required to overhaul their processes and technology to capture allocations, calculate 

margin requirements, ensure margin accuracy, and facilitate trade reporting and disaffirmations.70  

Finally, the commenter stated that moving to T+0 would require “complete dematerialization of 

securities.”71 

Other commenters argued that any move to shorten the settlement cycle to T+0 should be 

considered only after a successful transition to T+1.72  One such commenter stated that once the 

industry has established the full scope of work required for T+1 and is actively progressing 

towards implementation, the industry should conduct a “full review” to identify the scope of 

changes that are needed to effectuate a move to a T+0 standard settlement cycle.73   

                                                 
68  Id. 

69  Id. 

70  Id. 

71  Id. 

72  See, e.g., AGC April Letter, supra note 16, at 3–4; DTCC Letter, supra note 16, at 5; see 

also letter from Isabelle S. Corbett, Global Head of Government Relations, R3 LLC, at 3 (“R3 

Letter”) (supporting the view that “T+0 does not make sense today,” and stating that “further 

compression from T+1 should continue to be considered”); ASA Letter, supra note 16, at 3 

(arguing that the market is not prepared to move to T+0, and urging the Commission to continue to 

study and solicit public feedback on moving to T+0 rather than using the Commission’s T+1 

proposal as a vehicle to accelerate that shift). 

 
73  See, e.g., DTCC Letter, supra note 16, at 5. 



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Another commenter stated that moving to a T+0 settlement cycle would require significant 

industry and regulatory discussion, and technological upgrades and change, as well as the creation 

and implementation of new operating models and processes in many instances,74 but believed that 

the transition to a T+1 settlement cycle would be a valuable step towards T+0, as the industry 

would learn lessons that can be used to evaluate if and how a T+0 settlement cycle can be achieved 

in the longer term.75  However, according to the commenter, industry discussions on implementing 

T+0 at this time “may inadvertently divert resources from focusing on the requirements and issues 

related to delivering T+1 in the near future.”76   

Those commenters supporting an immediate move to T+0 or instantaneous settlement 

neither explained how either T+0 settlement or instantaneous settlement could be implemented, 

nor addressed the impediments to T+0 settlement that were cited by several of the commenters 

who argued that T+0 settlement is not achievable or not practical in the near term.  Nor did the 

comment letters supporting a T+0 settlement cycle or instantaneous settlement explain how a 

settlement cycle shorter than T+1 would reduce overall levels of risk in the clearance and 

settlement system.  These letters generally consisted of declaratory statements to the effect that 

either T+0 or instantaneous settlement is achievable now and should be implemented without 

delay, while offering no factual support for these views.77   

                                                 
74  AGC April Letter, supra note 16, at 3. 

75  See id. at 3–4. 

76  Id. at 4. 

77  See, e.g., Calaf Letter, supra note 16; Clemens Letter, supra note 18; Mahdere Letter, 

supra note 18; Nevarez Letter, supra note 19; Oakes Letter, supra note 18; Rathbone Letter, supra 

note 18; Seeton Letter, supra note 18.   



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2. Securities Excluded from Requirements under Exchange Act Rule 15c6-1 

The Commission also received comment letters discussing certain types of securities that 

the respective commenters believed should be excluded from the requirements under Exchange 

Act Rule 15c6-1, whether through amendment to the text of the rule or via separate exemptive 

relief.  Two of these commenters discussed whether Rule 15c6-1 should apply to security-based 

swap transactions78 and both expressed the view that the rule should not apply to such 

transactions.79  One of the two commenters stated that Rule 15c6-1 is “inapt” with respect to 

security-based swap transactions, which are “generally bilateral and executory in nature,” meaning 

that there are numerous terms that the parties typically agree to fulfill at later dates.80  This 

commenter further stated that “the [Dodd-Frank Wall Street Reform and Consumer Protection Act 

(“Dodd-Frank Act”)] mandated numerous requirements for security-based swaps that address the 

very credit, market and liquidity risks that, for broker-dealer transactions in securities, are 

addressed by the shortening of the settlement cycle from T+2 to T+1.”81  Because security-based 

                                                 
78  See MFA Letter, supra note 16, at 2; SIFMA April Letter, supra note 16, at 11–12.  As 

noted in the T+1 Proposing Release, the Commission previously issued an order that exempted 

security-based swaps from the requirements under Rule 15c6-1, and subsequently extended that 

exemptive relief on several occasions, but the exemptive relief that previously covered compliance 

with Rule 15c6-1 expired in 2020.  See T+1 Proposing Release, supra note 2, at 10446 n.83. 

79  See MFA Letter, supra note 16, at 2; SIFMA April Letter, supra note 16, at 11–12.  In 

addition to the comment letters discussing the prospective application of Rule 15c6-1 to security-

based swap transactions, the Commission received a small number of comment letters that 

recommended the continuation and/or expansion of certain regulatory relief from Rule 15c6-1 

previously provided by the Commission in certain exemptive orders.  These comments are 

discussed in Part II.B.5, which follows discussion of the comment letters that relate more directly 

to the text of Rule 15c6-1. 

80  SIFMA April Letter, supra note 16, at 11. 

81  Id. 



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swaps are already subject to a comprehensive regulatory regime, the commenter stated, these 

securities should not be subject to further regulation under the Commission’s proposal.82   

The same commenter highlighted certain “key differences” between security-based swaps 

and other types of securities.83  In particular, the commenter stated that for other types of 

securities, such as equity or debt, settlement occurs when the buyer receives the security purchased 

and the seller receives cash equaling the value of the security sold.84  For security-based swaps, 

however, a final net payment is paid by one party to the other at a future point in time to which the 

parties have contractually agreed.85  For all of these reasons, the commenter argued, the 

Commission should provide an express exclusion for security-based swaps, and “at the very least, 

any doubt caused by the reference in the [T+1 Proposing release] to security-based swaps should 

be resolved by [the Commission] clarifying that counterparties to such instruments, who generally 

agree to specific payment and settlement terms in writing, benefit from the existing override 

provision in [Rule 15c6-1(a)].”86 

The other comment letter discussing the prospective application of Rule 15c6-1 to security-

based swaps argued that the rule “should not apply to security-based swap transactions effected by 

a ‘security-based swap dealer,’ which is dually registered as a broker-dealer.”87  In support of this 

                                                 
82  Id. 

83  Id. 

84  Id. 

85  Id. 

86  Id. 

87  MFA Letter, supra note 16, at 2. 



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argument, the commenter stated that security-based swap transactions are typically bilateral 

transactions between sophisticated counterparties who deal directly with each other, and which are 

subject to unique capital, margin, and segregation requirements.88  Thus, according to the 

commenter, “there is no principled basis to apply Rule 15c6-1 to security-based swap transactions 

solely for the reason that a security-based swap dealer is also registered as a broker-dealer.”89  

Instead, the commenter argued, the Commission should modify the rule to exempt, or further 

exemptive relief should be provided for, security-based swaps “as noted in the [T+1 Proposing 

Release].”90 

3. Proposed Deletion of Rule 15c6-1(c) 

The Commission received one comment letter responding to the proposed deletion of 

paragraph (c) of Rule 15c6-1, and the commenter recommended that paragraph (c) be retained in a 

modified form, rather than being deleted. 91  Specifically, the commenter recommended that 

paragraph (c) be retained but modified to allow parties to settle on T+2, rather than T+1, in the 

case of a firm commitment underwriting.92  Under the commenter’s recommended modification, 

Rule 15c6-1(c) would provide a “fallback” to parties without an explicit agreement at the time of 

the transaction to settle on T+2 if unforeseen circumstances interfere with either party’s ability to 

                                                 
88  See id. 

89  Id. 

90  See id.; see also id. at n.11 (citing to T+1 Proposing Release, supra note 2, at 10446 n.83). 

91  See SIFMA April Letter, supra note 16, at 9–11. 

92  See id. at 10. 



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conform to a T+1 settlement date.93  The commenter also supported the continued retention of 

paragraph (d) of Rule 15c6-1, stating that paragraph (d) is “critically important for debt and 

preferred equity offerings.”94 

In support of the view that the Commission should retain a modified version of Rule 15c6-

1(c), the commenter stated that reliance on paragraphs (a) and (d) would be insufficient to prevent 

transactions for securities priced after 4:30 p.m. ET from failing to settle.95  Specifically, the 

commenter stated that while paragraphs (a) and (d) allow parties to agree to a longer settlement 

cycle, in order for the parties to avail themselves of that extended settlement date they must reach 

that agreement at the time of the transaction.96   

The commenter further stated that, “particularly in the context of common stock offerings, 

where an extended settlement is extremely difficult to implement, if specific issues are identified 

prior to pricing of the offering, in practically all such instances, the pricing of the offering would 

be delayed.”97  According to the commenter, the parties are “by definition” unable to foresee 

“unanticipated issues” prior to pricing of the offering.98   

Thus, the commenter stated that paragraphs (a) and (d) of Rule 15c6-1 would not allow 

parties to agree to a longer settlement cycle when circumstances unforeseen at the time of the 

                                                 
93  Id. at 10–11. 

94  Id. at 11. 

95  See id. at 10. 

96  See id. 

97  Id. 

98  Id. 



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pricing of the transaction arise that prevent settlement on T+1.99  For example, according to the 

commenter, “it is not unusual to face unanticipated issues relating to transfer agents, legend 

removal, local law matters (including local court approval), medallion guarantees or non-U.S. 

parties.”100  Finally, in support of the commenter’s belief that eliminating paragraph (c), together 

with a move to T+1, would lead to increased failures to settle trades with respect to firm 

commitment underwritings, the commenter cited the limited timeframe that would be available “to 

resolve issues” prior to settlement on T+1.101 

4. Retention of Exchange Act Rule 15c6-1(d) 

Paragraph (d) of Rule 15c6-1 provides that for purposes of paragraphs (a) and (c) of the 

rule, parties to a contract shall be deemed to have expressly agreed to an alternate date for payment 

of funds and delivery of securities at the time of the transaction for a contract for the sale for cash 

of securities pursuant to a firm commitment offering if the managing underwriter and the issuer 

have agreed to such date for all securities sold pursuant to such offering and the parties to the 

contract have not expressly agreed to another date for payment of funds and delivery of securities 

at the time of the transaction.102  The proposed rule text did not make any changes to paragraph (d) 

of Rule 15c6-1 other than technical conforming changes that would have been necessary if the 

Commission adopted the proposed deletion of paragraph (c) of the rule.103 

                                                 
99  See id. 

100  Id. 

101  Id. 

102  See 17 CFR 240.15c6-1(d). 

103  See T+1 Proposing Release, supra note 2, at 10448–49. 



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The Commission received one comment letter supporting the retention of paragraph (d) 

because, according to the commenter, it is “critically important for debt and preferred equity 

offerings.”104  However the comment letter did not further explain why paragraph (d) is important 

for such offerings.   

5. Exemptive Orders under Exchange Act Rule 15c6-1(b) 

The T+1 Proposing Release stated that, pursuant to Rule 15c6-1(b), the Commission has 

granted certain exemptions from the requirements under Rule 15c6-1, including an exemption for 

securities that do not have facilities for transfer or delivery in the U.S.105  The T+1 Proposing 

Release requested public comment on whether the conditions set forth in the Commission’s 

exemptive order for securities traded outside the U.S. are still appropriate, and whether the 

exemption should be modified.106  The Commission received several comment letters discussing 

whether the Commission should continue the exemption for foreign securities if the settlement 

cycle were shortened to T+1, and all of these commenters urged the Commission to retain the 

exemption, and/or recommended that the Commission make certain modifications to the 

exemption that would expand the scope of the exemption.107 

One commenter recommended that the Commission retain this exemption and explicitly 

state in the adopting release that the permissible settlement period for securities traded outside of 

                                                 
104  See SIFMA April Letter, supra note 16, at 11. 

105  See T+1 Proposing Release, supra note 2, at 10446–47 (citing to Exchange Act Release 

No. 35750 (May 22, 1995), 60 FR 27994, 27995 (May 26, 1995)). 

106  See T+1 Proposing Release, supra note 2, at 10451. 

107  See Fidelity Letter, supra note 16, at 5; SIFMA April Letter, supra note 16, at 1, 7–9; Virtu 

Financial Letter, supra note 16, at 2; see also ICI Letter, supra note 16, at 4. 

https://www.westlaw.com/Link/Document/FullText?findType=Y&pubNum=0006509&cite=RELNO35750&originatingDoc=I22573FD0954811ECAD16BA518F08D433&refType=CA&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)
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the U.S. should be defined by the local market.108  The commenter stated that settling trades with 

different time zones is already a difficult process and accelerating the settlement cycle for these 

securities would make cross-border transactions even more challenging.109 

Another commenter stated that the exemption for foreign securities should be retained and 

modified to address “certain product misalignment matters.”110  This commenter observed that in 

many non-U.S. markets today, trades settle on a T+2 basis.111  Therefore, the commenter stated, 

unless those markets transition to a T+1 settlement timeframe when the U.S. moves to a T+1 cycle, 

U.S. broker-dealers will not be able to comply with Rule 15c6-1 for trades in foreign securities.112 

Additionally, according to the commenter, retaining the exemption for transactions in 

foreign securities in non-U.S. markets would not address the misalignment of settlement cycles 

between U.S. securities and non-U.S. securities that impacts U.S. securities that are exchangeable 

for a foreign security or a basket of foreign securities.113  The commenter highlighted in particular 

ADRs, and ETFs with an underlying basket of foreign securities, which according to the 

commenter, illustrate this misalignment.114 

                                                 
108  See Fidelity Letter, supra note 16, at 5. 

109  See id. 

110  SIFMA April Letter, supra note 16, at 7–9. 

111  Id. at 7. 

112  See id. 

113  See id. at 8. 

114  See id.  As noted in the T+1 Proposing Release, under the Commission’s existing 

exemption, an ADR is considered a separate security from the underlying security.  Thus, if there 

are no transfer facilities in the U.S. for a foreign security but there are transfer facilities for an 



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With respect to ADRs, the commenter stated that market makers and other market 

participants may purchase foreign shares and sell related ADRs in the U.S. on the same trading 

day, and thus timely settle the sale of the ADRs using the newly created ADRs.115  According to 

the commenter, this type of trade will not be possible if the underlying foreign shares settle on T+2 

and the related ADR is required to settle on T+1.116  The result, the commenter stated, is likely to 

be wider bid-ask spreads for the ADR because market makers must take into account the additional 

cost of borrowing securities and other financing costs to avoid settlement failures.117  Additionally, 

the commenter argued, the incidence of fails would likely increase as a result of the misaligned 

settlement cycles, particularly where it is not possible to borrow securities to make delivery, and a 

knock-on effect could be to increase the incidence of buy-ins as well.118 

Separately, the same commenter argued that the ETF creation/redemption process is 

impacted by the misalignment of global securities transaction settlement cycles where the basket of 

securities underlying an ETF includes foreign securities.119  In explaining this view, the commenter 

observed that ETF shares are created by an authorized participant (“AP”) depositing the daily 

creation basket of shares (and/or cash) with the ETF and, in exchange for the deposit of the basket, 

                                                 

ADR based on such foreign security, only the foreign security will be exempt from Rule 15c6-1.  

See T+1 Proposing Release, supra note 2, at 10446. 

115  See SIFMA April Letter, supra note 16, at 8. 

116  See id. 

117  See id. 

118  See id. 

119  See id. 



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the ETF issues to the AP a specified number of ETF shares, referred to as a “creation unit.”120  The 

commenter further stated that if foreign securities comprise some or all of the ETF creation basket, 

the AP will typically need to purchase those securities in the local market.121 

Another commenter urged the Commission to “exempt from T+1 settlement” U.S.-listed 

ETFs with baskets that contain foreign securities and ADRs.122  In support of this 

recommendation, the commenter stated that the misalignment in settlement cycles between the 

U.S. and foreign jurisdictions that continue to settle on a T+2 basis, coupled with time zone 

differences, may increase certain risks, such as failed trades, accrual differences, net asset value 

miscalculations, and investment guideline breaches.  The same commenter stated that due to the 

resulting misalignment in settlement cycles between the U.S. and foreign markets upon 

transitioning to T+1, an ADR provider may incur borrowing and other costs related to the 

underlying foreign security to facilitate T+1 settlement of the ADR.123  According to the 

commenter, these costs would likely be passed down to investors and thus make it more expensive 

to obtain investment exposure to foreign markets.124 

As discussed in the T+1 Proposing Release, the Commission has also previously granted a 

separate exemption from Rule 15c6-1 for contracts for the purchase or sale of any security issued 

                                                 
120  Id. 

121  See id. 

122  See ICI Letter, supra note 16, at 4; see also Virtu Financial Letter, supra note 16, at 2 

(recommending that for primary creations and redemptions alternative settlement date options be 

available so the foreign security basket and the U.S. ETF settlement can be “in sync”). 

123  See id. 

124  See id. 



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by an insurance company (as defined in section 2(a)(17) of the Investment Company Act) that is 

funded by or participates in a “separate account” (as defined in section 2(a)(37) of the Investment 

Company Act), including a variable annuity contract or a variable life insurance contract, or any 

other insurance contract registered as a security under the Securities Act of 1933 (“Securities 

Act”).125  In granting this exemption, the Commission recognized that “the mechanics of purchases 

and redemptions of insurance securities products are distinct from those of other securities and 

that, because of the time required to complete necessary preparations, such transactions typically 

require more protracted settlement periods,” and that “compliance with the unique requirements of 

state and Federal law, as well as of the particular administrative procedures, applicable to 

insurance securities products demands additional time beyond the standard settlement process.”126  

The T+1 Proposing Release requested public comment on whether the conditions set forth in the 

exemptive order for insurance products continued to be appropriate, or if they should be modified.  

The three commenters that discussed this exemption uniformly agreed that the conditions 

and considerations set forth in the Insurance Products Exemption Order apply as much today, if 

not with greater force, as when the Commission adopted the exemption in 1995 (and which it left 

in place in 2017), and that the exemption should be preserved.127  In support of this view, one 

                                                 
125  See T+1 Proposing Release, supra note 2, at 10447. 

126  Exchange Act Release No. 35815 (June 6, 1995), 60 FR 30906, 30907 (June 12, 1995) 

(“Insurance Products Exemption Order”). 

127  See letter from Eversheds Sutherland (US) LLP for the Committee of Annuity Insurers 

(Apr. 11, 2022), at 1–3; (“CAI Letter”); Fidelity Letter, supra note 16, at 5–6; SIFMA April Letter, 

supra note 16, at 9.  These commenters also cited to comment letters that had been submitted in 

response to the T+2 Proposing Release in support of retaining the Insurance Products Exemption 

Order. 



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commenter said it was not aware of any material change of circumstances that would warrant a 

change.128  Another commenter observed that the same administrative processes and regulatory 

requirements under state and Federal law that warranted the insurance products exemption were 

even more relevant for T+1 since insurance products have only grown more complex since the 

industry transitioned to T+2 in 2017.129 

C. Final Rule and Discussion 

1. Amendment to Exchange Act Rule 15c6-1(a) 

The Commission is amending paragraph (a) of Exchange Act Rule 15c6-1 as proposed.  

Rule 15c6-1(a) will prohibit broker-dealers from effecting or entering into a contract for the 

purchase or sale of a security (other than an exempted security, a government security, a municipal 

security, commercial paper, bankers’ acceptances, or commercial bills) 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. Subject to the 

exceptions enumerated in paragraphs (a) and (b) of the rule, the prohibition in paragraph (a) of 

Rule 15c6-1 applies to all securities.  However, as discussed in Part II.C.3 below, the Commission 

is amending paragraph (b) of Rule 15c6-1 to exclude security-based swaps from the requirements 

under paragraphs (a) and (c) of the rule. 

                                                 
128 See SIFMA April Letter, supra note 16, at 9 (stating that “in addition to retaining the 

exemptions, SIFMA recommends that the exemptions either be codified in Rule 15c6-1(b), or that 

the Commission issue a new order to replace the orders issued in 1995 to facilitate access to the 

terms of the exemptions and to facilitate compliance with their terms”).  This statement appears to 

collectively reference the exemption for insurance products, as well as the exemption for securities 

that do not have facilities for transfer and delivery in the U.S., both of which were issued in 1995. 

129  See Fidelity Letter, supra note 16, at 6. 



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The Commission’s reasons for amending Rule 15c6-1(a) to shorten the standard settlement 

cycle to T+1 are consistent with those articulated in the T+1 Proposing Release,130 and many of the 

comment letters submitted in response to that release.  First, the Commission continues to believe 

that shortening the standard settlement cycle to T+1 would result in a reduction in the number and 

total value of unsettled trades that exist at any point in time.  Assuming that trading volume 

remains constant, shortening the standard settlement cycle to T+1 should also decrease the total 

market value of all unsettled trades in the U.S. clearance and settlement system.  This reduction in 

the number and total value of unsettled securities transactions should result in a reduction in 

market participants’ overall exposure to market risk that arises from such transactions. 

 As explained in the T+1 Proposing Release, the Commission believes that shortening the 

standard settlement cycle to T+1 should also reduce CCP exposure to credit, market, and liquidity 

risk arising from its obligations to its participants, promoting the stability of the CCP and thereby 

reducing the potential for systemic risk to transmit through the financial system.131  Reducing these 

risks to the CCP would enable the CCP to reduce the overall size of the financial resources that the 

CCP requires of its participants, lowering costs to the CCP’s participants, and potentially their 

customers (i.e., other market participants and investors).  

As further explained in the T+1 Proposing Release, in periods of market stress, liquidity 

demands imposed by the CCP on its participants, such as in the form of intraday margin calls, can 

produce procyclical effects that reduce overall market liquidity.132  The T+1 Proposing Release 

                                                 
130  See T+1 Proposing Release, supra note 2, at 10447–49. 

131        See id. at 10448. 

132  See id. 



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further stated that reducing the CCP’s liquidity exposure by shortening the settlement cycle can 

help limit this potential for procyclicality, enhancing the ability of the CCP to serve as a source of 

stability and efficiency in the national clearance and settlement system.133  

Shortening the standard settlement cycle to T+1 also would enable investors to access the 

proceeds of their securities transactions sooner than they are able to in the current T+2 

environment.  Specifically, in a T+1 environment, sellers would have access to cash proceeds one 

day sooner and buyers would see purchased securities in their accounts one day earlier relative to a 

T+2 standard settlement cycle.   

Finally, market participants have already taken significant steps toward identifying the 

industry requirements and timelines for moving to T+1, and have made substantial progress in 

terms of planning such a move.134  Due to these efforts, the Commission believes that a successful 

move to T+1 settlement can occur by the compliance date,135 and the Commission believes that 

delaying such a move would allow undue risk to continue to exist in the U.S. clearance and 

settlement system.  

In response to the comment letters focusing on the challenges and costs associated with the 

prospective misalignment of securities settlement cycles that may follow a move to T+1 in the 

                                                 
133  See id. 

134  See, e.g., Deloitte, DTCC, ICI, and SIFMA, T+1 Securities Settlement Industry 

Implementation Playbook (Aug. 2022, updated Dec. 2022) (“T+1 Playbook”), 

https://www.dtcc.com/ust1/industry-playbook.  Additional information and documentation related 

to the industry’s ongoing planning related to the prospective move to a T+1 settlement cycle is also 

publicly available at https://www.dtcc.com/ust1/industry-playbook. 

135  See infra Part VII.A (discussing the compliance date of May 28, 2024, for the amendments 

to Exchange Act Rule 15c6-1(a)). 

https://www.dtcc.com/ust1/industry-playbook
https://www.dtcc.com/ust1/industry-playbook


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U.S.,136 the Commission agrees that such misalignment will likely present some challenges that 

may increase costs for certain market participants, including asset managers.  For example, the 

Commission recognizes that financing U.S. market transactions that settle on T+1 with the 

proceeds of an FX transaction that settles on T+2 may become more difficult, and therefore more 

costly, than financing of T+2 transactions is today.  However, market participants can modify their 

existing business practices in ways that allow their securities transactions in the U.S. to settle on 

T+1.137   

For example, market participants may extend the closing time for their FX trading desks, or 

they may pre-fund certain T+1 transactions that would otherwise be funded by an FX transaction 

that is executed on the same day as the securities transaction in the U.S.  In addition, as one 

commenter stated, asset managers may, in some cases, redeem money market positions, or rely on 

other financial resources, to meet their financing needs.138  While the Commission acknowledges 

that undertaking any of the three adjustments described here may increase certain costs for some 

market participants, shortening the standard settlement cycle to T+1 will reduce other costs (e.g., 

                                                 
136  See MarketAxess Letter, supra note 29, at 1–2; ICI Letter, supra note 16, at 4; Ballie 

Gifford Letter, supra note 50, at 1–2. 

137  The Commission observes that settlement cycles vary across asset classes.  For example, 

transactions in U.S. Treasury securities currently settle on a T+1 basis, and market participants use 

the proceeds of FX transactions to fund transactions in U.S. Treasury securities despite 

mismatched settlement cycles.  See infra note 618 (discussing the same, as well as other 

examples). 

138  AIMA Letter, supra note 29, at 5–6.   



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margin charges), increase capital efficiency, and reduce risk in the U.S. clearance and settlement 

system.139 

With respect to the suggestion of one commenter that the “appropriate market authorities” 

mandate a change in “the official equity trading day” for U.S. markets to close one hour earlier, at 

3:00 p.m. rather than 4:00 p.m. ET, to provide firms with more time to match trades and ensure the 

“settlement FX” is in place for the following day,140 the Commission believes that such a change is 

not necessary for a successful transition to T+1 to occur, and is otherwise not justified.  As 

explained in the paragraph immediately above, the Commission believes that market participants 

will be able to adjust their business practices to address the challenges associated with the 

misalignment of the T+1 settlement cycle for securities in the U.S. markets with the T+2 

settlement cycle for FX transactions.  In addition, the Commission believes that the commenter’s 

recommendation to shorten the length of the trading day in the U.S. equity markets specifically to 

address the commenter’s concern about FX transactions could have a negative impact on the 

trading activity and operations of market participants.  In particular, the Commission believes that 

modifying the length of the trading day would alter the existing operations of the U.S. securities 

markets prior to market close in a way that is disproportionate to the impact of the Commission’s 

proposal on the ability of market participants to use FX transactions to finance securities 

                                                 
139  See infra Part VIII.C.1 (discussing the anticipated benefits of shortening the standard 

settlement cycle to T+1). 

140  See Ballie Gifford Letter, supra note 50, at 2.Conformed to Federal Register version 

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transactions in the U.S markets because market participants will be able to adjust their business 

practices to address the challenges.141 

With respect to the commenter’s suggestion that the Commission “could allow for a 

mismatch of FX settlement dates as a valid reason for T+2 settlement arrangements without [such 

arrangements] breaching an investment adviser’s best execution obligation,”142 as explained above, 

the Commission believes that market participants will be able to adjust their business practices to 

address the challenges associated with the prospective mismatch between the settlement cycles for 

FX trades and the settlement cycle for securities transactions in the U.S. markets.  Even if a 

mismatch between the settlement time for FX transactions and a T+1 standard settlement cycle for 

U.S. securities transactions raises the cost of funding some transactions, as discussed previously, 

the Commission also believes that shortening the standard settlement cycle to T+1 will reduce 

other costs (e.g., margin charges), increase capital efficiency, and reduce risk in the U.S. clearance 

and settlement system.143  Additionally, while the commenter correctly states that the 

Commission’s proposal would allow parties to extend settlement only if they reach agreement at 

the time of the transaction, the commenter does not explain its understanding that “this would be 

difficult to implement in the context of trades that require the settlement of FX transactions to 

occur,” or that “for this reason a standing option to settle at T+2 would be more effective.”144  To 

                                                 
141  See infra notes 617–619 and accompanying text (further discussing the anticipated 

economic effects resulting from mismatched settlement cycles). 

142  See Ballie Gifford Letter, supra note 50, at 2. 

143  See supra note 139 and accompanying text (further discussing the other costs that would be 

reduced, as well as the increase in capital efficiency, and the reduction in risk to the U.S. clearance 

and settlement system). 

144  See Ballie Gifford Letter, supra note 50, at 2. 



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the extent the commenter is recommending that the Commission establish a separate T+2 

settlement cycle for transactions that are funded using FX transactions, such an approach is not 

workable because the counterparties to such transactions generally would not know whether the 

transaction had been funded in this way—unless the parties agreed to disclose in advance of the 

transaction the source of funding—and therefore also would not know whether to expect their 

securities transaction to settle on T+1 or T+2. 

The Commission has also considered the arguments submitted by one commenter that any 

misalignment of settlement cycles that follows a move to T+1 in the U.S. would increase the 

number of fails in connection with cross-border transactions and may force broker-dealers to 

decrease or cease offering cross-border services to their clients, and ultimately will reduce liquidity 

for U.S. investors.145  The commenter also specifically stated its expectation that there will be a 

significant number of settlement fails when a U.S. market participant is buying bonds and a “cross-

border participant” is unable to deliver the bonds until T+2.146  The Commission disagrees with 

each of the commenter’s statements for the reasons explained below. 

The Commission does not believe that the prospective misalignment of settlement cycles 

resulting from a move to T+1 will increase the number settlement fails connected with cross- 

border transactions.147  While settlement fails can occur for many different reasons, market 

participants will have many months to continue their planning and preparation for the move to 

                                                 
145  See MarketAxess Letter, supra note 29, at 1. 

146  Id.   

147  See infra notes 617–619 and accompanying text (further discussing the anticipated 

economic effects resulting from mismatched settlement cycles). 



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T+1.  By the time the transition to T+1 occurs, market participants will have had ample 

opportunity to analyze whether any given transaction presents an unacceptable risk of a settlement 

fail, and, as stated above,148 have options for adjusting their business practices to account for the 

challenges associated with settlement of certain transactions in a T+1 environment, such as FX 

transactions or other transactions with cross-border considerations.   

With respect to the commenter’s specific statement regarding the purchase of bonds by a 

U.S. market participant and the inability of a “cross-border participant” to deliver such bonds until 

T+2, the Commission acknowledges that in some cases it may be difficult for market participants 

to deliver bonds on T+1 when they seek to purchase the bonds in a foreign market and sell the 

same bonds in the U.S. market on the same day.  However, market participants will know the 

timing of their settlement obligations prior to entering into contracts to purchase bonds in a foreign 

market and sell them in the U.S. market.  If a market participant knows that the standard settlement 

cycle for the U.S. market transaction is shorter than the settlement cycle for the foreign market 

transaction, it may plan to either make arrangements to purchase or borrow the bonds sufficiently 

in advance of entering into the U.S. market transaction, or agree to a settlement date that is later 

than T+1 for the U.S. market transaction.  In cases where none of these options is viable, market 

participants may also decide not to enter into the U.S. market transaction rather than entering into a 

transaction that would predictably result in a settlement fail.  In the Commission’s view, these 

same options also may be available to market participants with respect to transactions in other 

types of securities and are not unique to bond market transactions.149 

                                                 
148  See supra note 138 and accompanying text. 

149  See infra notes 617–619 and accompanying text (further discussing the anticipated 

economic effects resulting from mismatched settlement cycles). 



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With respect to the commenter’s concerns regarding liquidity, even if moving to a T+1 

settlement cycle in the U.S. does increase the number of fails associated with certain securities 

transactions in the U.S. market, it does not necessarily follow that any prospective misalignment of 

settlement cycles would result in either increased fails in the U.S. market overall, or a reduction in 

the amount of liquidity available to U.S. investors.150  As explained above, the Commission 

expects that shortening the standard settlement cycle to T+1 will reduce risk in the clearance and 

settlement system by reducing the number of unsettled transactions that exist at any given point in 

time,151 and will result in increased overall liquidity in the U.S. markets.  That view is also 

consistent with many of the comment letters submitted in response to the T+1 Proposing 

Release.152 

With respect to the comment stressing the need for the Commission to work with 

international regulators to coordinate a move to T+1 settlement on a global basis if possible,153 the 

Commission and its staff intend to continue to work with regulators in other jurisdictions to ensure 

that the move to a T+1 settlement cycle in the U.S. is successfully implemented while minimizing 

any adverse impact the transition may have on market participants who engage in transactions in 

both the U.S. market and foreign markets.  However, the Commission believes that delaying the 

transition to T+1 in the U.S. until other jurisdictions have also committed to implementing T+1 is 

                                                 
150  See infra Part VIII.C.4 (further discussing the anticipated impact on settlement fails and 

liquidity). 

151  See supra note 130 and accompanying text. 

152  See supra notes 20, 22, and accompanying text. 

153  Id. 



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not necessary for a successful transition to T+1 to occur in the U.S.154  As a general matter, the 

Commission and Commission staff continue to engage with authorities in other jurisdictions 

regarding regulatory changes in the U.S., including to discuss differences between U.S. 

requirements and requirements in other jurisdictions, including through the Commission’s ongoing 

participation in the Financial Stability Board, the International Organization of Securities 

Commissions (“IOSCO”), and CPMI-IOSCO.155   

2. Response to Comments Relating to T+0 Settlement 

The Commission has carefully considered the comments it received relating to the 

prospective benefits and challenges associated with moving to a T+0 settlement cycle.  The 

Commission believes that shortening the settlement cycle further than T+1 could ultimately 

produce considerable additional benefits to investors compared with shortening the settlement 

cycle to T+1.  However, the Commission continues to believe that shortening the settlement cycle 

to T+0 would require the industry to develop solutions to the many challenges identified by market 

participants as impediments to such a move, as discussed at length in the T+1 Proposing 

                                                 
154  The Canadian Securities Authorities recently issued a proposal to transition the securities 

markets in Canada to T+1 to align with the T+1 standard settlement cycle adopted in this release.  

See Canadian Securities Administrators, Press Release, Canadian securities regulators outline steps 

to support transition to T+1, Dec. 15, 2022, https://www.securities-

administrators.ca/news/canadian-securities-regulators-outline-steps-to-support-transition-to-t1/.  

155  CPMI-IOSCO refers to the work undertaken jointly by IOSCO and the Committee on 

Payment and Market Infrastructures (“CPMI”) to enhance the international coordination of 

standard and policy development and implementation regarding clearing, settlement, and reporting 

arrangements, including with respect to financial market infrastructures such as central 

counterparties and central securities depositories. 

https://www.securities-administrators.ca/news/canadian-securities-regulators-outline-steps-to-support-transition-to-t1/
https://www.securities-administrators.ca/news/canadian-securities-regulators-outline-steps-to-support-transition-to-t1/


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Release,156 in the T+1 Report,157 and in several comment letters158 submitted in response to the 

T+1 Proposing Release.  Such impediments include, for example, challenges related to maintaining 

multi-lateral netting, institutional trade processing, securities lending practices, money settlement 

systems, mutual fund and ETF processing, transaction funding requirements, and corporate action 

processing.  Given the operational and technological challenges associated with moving to a T+0 

settlement cycle, the Commission believes that a successful move to T+0 would take longer to 

design and implement, and cost more than, a successful move to a T+1 settlement cycle.159 

Shortening the settlement cycle to T+1 will result in substantial benefits to market 

participants that will be attainable much sooner than shortening the settlement cycle to T+0.  Thus, 

the Commission believes shortening the settlement cycle to T+1 to be the more prudent and 

practical approach to shortening the settlement cycle at this time.   

However, the Commission continues to believe, as it stated in the T+1 Proposing Release, 

that the transition to a T+1 settlement cycle can be a useful step in identifying potential paths to 

T+0 settlement.160  As the securities industry moves forward to implement a T+1 standard 

settlement cycle, this process generally should include consideration of the potential paths to 

                                                 
156  See T+1 Proposing Release, supra note 2, at 10467–74. 

157  See T+1 Report, supra note 61, at 10–11. 

158  See supra notes 59–60, 62–71, and accompanying text. 

159  Because industry participants have not developed solutions to the technological, 

operational, and business challenges and impediments associated with a move to a T+0 settlement 

cycle, at this time the Commission cannot reasonably provide estimates regarding the length of 

time that would be necessary for a successful move to T+0, or the costs associated with such a 

move. 

160  See T+1 Proposing Release, supra note 2, at 10465. 



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achieving T+0 to help ensure that investments in new technology and operations undertaken to 

achieve T+1 can maximize the value of such investments over the long term.  Following the 

transition to T+1 in the U.S. markets, Commission staff will continue to work with industry 

leaders, public interest advocates, investors and other regulators to assess the future feasibility of a 

T+0 settlement standard cycle, and seek to identify ways to overcome the challenges associated 

with such a move, as articulated in the T+1 Proposing Release.161 

3. Amendments to Exchange Act Rule 15c6-1(b) 

The Commission is amending paragraph (b) of Exchange Act Rule 15c6-1 to exclude 

security-based swaps from the requirements under paragraph (a) of the rule.  The T+1 Proposing 

Release asked whether the Commission should provide exemptive relief from the requirements 

under Rule 15c6-1 for transactions in security-based swaps.162  As discussed above, the 

Commission received two comment letters that discussed whether Rule 15c6-1 should apply to 

security-based swap transactions and both of these commenters urged the Commission to exclude 

security-based swaps from the requirements under the rule.163  The Commission agrees with the 

comment letter highlighting “key differences” between security-based swaps and other types of 

securities, and agrees that such differences warrant excluding security-based swaps from the 

requirements under paragraph (a) of Rule 15c6-1.  In the Commission’s view, such characteristics 

of security-based swaps make transactions in security-based swaps inconsistent with the purpose, 

intent, and structure of Rule 15c6-1, as discussed further below. 

                                                 
161  Id. at 10467–75. 

162  See id. at 10451. 

163  See supra note 78 and accompanying text. 



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First, consistent with the Commission’s understanding of security-based swap transactions, 

the commenter explains that for security-based swaps “final net payment is paid by one party to 

the other at a future point in time to which the parties have contractually agreed.”164 The 

commenter also states that Rule 15c6-1 is “inapt” with respect to security-based swap transactions, 

which are “generally bilateral and executory in nature,” meaning that there are numerous terms 

that the parties typically agree to fulfill at later dates.165  The Commission believes that the 

commenter’s description of security-based swaps is accurate. 

The Commission further believes that excluding security-based swaps from the 

requirements under paragraph (a) of Rule 15c6-1 would be consistent with the purpose of the rule.  

The Commission first proposed Rule 15c6-1 to establish T+3 as “the standard settlement time 

frame for broker-dealer trades,”166 and explained in the T+3 Proposing Release that the rule “is 

designed to establish T+3 as a new ‘default’ contract term.”167  The T+3 Proposing Release further 

stated that most broker-dealers do not specify all of the terms of a trade before execution, but rely 

on industry custom and SRO rules for those terms, and the Commission did not intend to change 

industry custom to require broker-dealers to specify contract terms.168  Unlike other securities 

transactions, however, security-based swap contracts generally do include contract terms that 

specify the timing of contractual obligations, and for that reason there is not a need for any rule-

based “default” contract term that provides for the timing of such obligations.   

                                                 
164  SIFMA April Letter, supra note 16, at 11. 

165  Id. 

166  T+3 Proposing Release, supra note 4, at 11806–07. 

167  Id. at 11809. 

168  See id. 



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Because security-based swap contracts provide for the timing of contractual obligations, 

the Commission does not anticipate that it will become necessary for Rule 15c6-1(a) to apply to 

security-based swap transactions at any point in the future.  As such, the Commission is amending 

the text of Rule 15c6-1(b) to exclude security-based swaps from the requirements under Rule 

15c6-1(a), rather than issuing a new exemptive order that would accomplish the same objective. 

As discussed further in Part VII.B, the amendments to Rule 15c6-1(b) that the Commission 

is adopting in this document, including both the new provision that exempts security-based swaps 

from the scope of paragraph (a), as well as the technical conforming changes to Rule 15c6-1(b) 

described below, will become effective upon the effective date of the rule.  The Commission has 

determined that these changes should become effective upon the effective date, rather than the 

compliance date for Rule 15c6-1 more generally, to avoid any possible confusion as to whether 

broker-dealer transactions in security-based swaps may or may not be subject to Rule 15c6-1(a) 

between the effective date and the compliance date. 

As explained in the T+1 Proposing Release, Rule 15c6-1(b)(1) currently provides an 

exclusion for contracts involving the purchase or sale of limited partnership interests that are not 

listed on an exchange or for which quotations are not disseminated through an automated quotation 

system of a registered securities association.169  No commenters suggested amending the exclusion 

under existing Rule 15c6-1(b)(1), and the amendments to Rule 15c6-1(b) being adopted in this 

document do not include any changes to this exclusion. 

In recognition of the fact that the Commission may not have identified all situations or 

types of trades where the application of Rule 15c6-1(a) would be problematic, existing Rule 15c6-

1(b)(2) provides that the Commission may exempt by order additional types of trades from Rule 

                                                 
169  See T+1 Proposing Release, supra note 2, at 10446. 



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15c6-1(a), either unconditionally or on specified terms and conditions, if the Commission 

determines that such an exemption is consistent with the public interest and the protection of 

investors.170  No commenters suggested any amendments to paragraph (b)(2) of Rule 15c6-1, and 

the Commission is not amending this provision of the rule.  Accordingly, the Commission is 

making no substantive changes to the existing provision that is currently designated as paragraph 

(b)(2).  However, the amendments to Rule 15c6-1(b) being adopted in this document will 

redesignate existing paragraph (b)(2) of the rule as paragraph (b)(3) of the rule, and a new 

provision that excepts security-based swap transactions from the requirements under paragraph (a) 

of Rule 15c6-1 will be designated as paragraph (b)(2) of the rule.171   

The rule amendments being adopted in this document also strike the term “contracts” from 

the first clause in paragraph (b) of Rule 15c6-1, and add the words “Contracts for” to the beginning 

of paragraphs (b)(1) and (3) (formerly paragraph (b)(2)).  These technical changes are intended to 

account for the fact that the definition of a security-based swap under section 3(a)(68) of the 

Exchange Act172 incorporates the term “contract” and leaving the same term in the first clause of 

Rule 15c6-1(b) could create confusion as to the meaning of the new provision under paragraph 

(b)(2) of the rule, which refers to security-based swaps. 

4. Amendment to Exchange Act Rule 15c6-1(c) 

The Commission is amending paragraph (c) of Exchange Act Rule 15c6-1 to shorten the 

settlement cycle for firm commitment offerings for securities that are priced after 4:30 p.m. ET, 

unless otherwise expressly agreed to by the parties at the time of the transaction.  Specifically, the 

                                                 
170  See 17 CFR 240.15c6-1(b)(1). 

171  See 17 CFR 240.15c6-1(b)(1)–(3). 

172  See 15 U.S.C. 78c(a)(68). 



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amendment to paragraph (c) of Rule 15c6-1 will shorten the standard settlement cycle for these 

offerings from T+4 to T+2.  As amended, paragraph (c) of Rule 15c6-1 will provide that paragraph 

(a) of the rule does not apply to contracts for the sale for cash of securities that are priced after 

4:30 p.m. ET on the date such securities are priced and that are sold by an issuer to an underwriter 

pursuant to a firm commitment underwritten offering registered under the Securities Act or sold to 

an initial purchaser by a broker-dealer participating in such offering provided that a broker or 

dealer shall not effect or enter into a contract for the purchase or sale of such securities that 

provides for payment of funds and delivery of securities later than the second business day after 

the date of the contract, unless otherwise expressly agreed to by the parties at the time of the 

transaction.173 

As explained in the T+1 Proposing Release, in 1995 the Commission added paragraph (c) 

to Rule 15c6-1 in response to public comments stating that new issue securities could not settle on 

T+3 because prospectuses could not be printed prior to the trade date (the date on which the 

securities are priced).174  The T+1 Proposing Release proposed to delete paragraph (c) based on the 

Commission’s belief that expanded application of the “access equals delivery” standard for 

prospectus delivery supports removing paragraph (c) from Rule 15c6-1 because delays in the 

process that previously made delivery of the prospectus difficult to achieve under the standard 

settlement cycle have been mitigated by the “access equals delivery” standard.175  However, the 

T+1 Proposing Release also acknowledged that the T+1 Report had recommended the Commission 

                                                 
173  See 17 CFR 240.15c6-1(c). 

174  See T+1 Proposing Release, supra note 2, at 10449. 

175  See id. 



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retain paragraph (c), but modify it to shorten the standard settlement cycle for firm commitment 

offerings priced after 4:30 p.m. ET from T+4 to T+2.176  Additionally, the Commission requested 

public comment on the proposed deletion of paragraph (c) and requested that, to the extent that 

commenters agree with the T+1 Report, such commenters provide data or other detailed 

information explaining why a T+1 settlement cycle is an inappropriate standard for all firm 

commitment offerings priced after 4:30 p.m.177   

After reviewing the comment letters received in response to the T+1 Proposing Release, the 

Commission continues to believe that the process that made delivery of the prospectus difficult to 

achieve under the standard settlement cycle has been mitigated by the “access equals delivery” 

standard.  However, the Commission also is persuaded by the comment letter arguing that the 

Commission should retain paragraph (c) of Rule 15c6-1, but shorten the settlement cycle to T+2 

for firm commitment offerings for securities that are priced after 4:30 p.m. ET, unless otherwise 

expressly agreed to by the parties at the time of the transaction.178   

The Commission is persuaded that a T+1 settlement cycle is not long enough to prevent 

firm commitment offerings priced after 4:30 p.m. ET from failing to settle on time.  In particular, 

the Commission acknowledges that paragraphs (a) and (d) of Rule 15c6-1 would not allow parties 

to agree to a longer settlement cycle when circumstances unforeseen at the time of the pricing of 

                                                 
176  See id. (citing T+1 Report, supra note 61, at 33). 

177  See id. at 10450. 

178  See supra Part II.B.3 (providing a detailed description of comment letters urging the 

Commission to adopt a T+2 settlement cycle for firm commitment offerings for securities that are 

priced after 4:30 p.m. ET, unless otherwise expressly agreed to by the parties at the time of the 

transaction). 



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the transaction arise that prevent settlement on T+1.179  Specifically, while paragraphs (a) and (d) 

allow parties to agree to a longer settlement cycle, in order for the parties to avail themselves of 

that extended settlement date, they must reach that agreement at the time of the transaction and 

must take affirmative steps in advance of each such transaction in order to obtain relief under 

paragraph (a) or (d).  

With respect to unforeseen circumstances that arise in connection with firm commitment 

offerings, for example, as stated by a commenter, it is not unusual for unanticipated issues relating 

to transfer agents, legend removal, local law matters (including local court approval), medallion 

guarantees or non-U.S. parties to arise.180  Such unanticipated issues could lead to increased 

failures to settle trades on a T+1 basis with respect to firm commitment offerings priced after 4:30 

p.m. ET.  For these reasons, the Commission has reconsidered its proposed deletion of paragraph 

(c) of Rule 15c6-1. 

As stated above, the comment letter discussing the proposed deletion of paragraph (c) 

stated that the Commission should amend paragraph (c) to establish a T+2 settlement cycle for 

firm commitment offerings priced after 4:30 p.m. ET.181  The Commission agrees with the 

commenter’s recommendation, and is amending paragraph (c) to establish a T+2 settlement cycle 

for these offerings, rather than deleting paragraph (c) as the Commission proposed.  In the T+1 

                                                 
179  In the T+1 Proposing Release the Commission acknowledged that the complex 

documentation associated with firm commitment offerings may in some cases require more time to 

complete than is available under a T+1 standard settlement cycle.  See T+1 Proposing Release, 

supra note 2, at 10450–51.   

180  See SIFMA April Letter, supra note 16, at 10. 

181  See id. 



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Proposing Release, the Commission considered such a T+2 standard as an alternative to deleting 

paragraph (c), but proposed deleting paragraph (c) to fully harmonize the settlement of primary 

offerings with the settlement cycle for secondary market trades, thereby removing all financial and 

operational risks that can arise when the same security settles on two different settlement cycles.182  

In proposing this approach, the Commission stated its belief that paragraph (d) would provide 

sufficient flexibility to manage the need for a longer settlement cycle when it arises.183  In light of 

the comments received, and as discussed above, the Commission now believes that the flexibility 

provided by paragraph (d) is insufficient to ensure timely settlement for certain firm commitment 

offerings under a T+1 standard settlement cycle.  Accordingly, the Commission believes that the 

proposed alternative—retaining paragraph (c) but shortening the standard settlement cycle under 

the provision to T+2—would best achieve the Commission’s stated objective of establishing a 

common standard that effectively minimizes the financial and operational risks associated with the 

settlement of firm commitment offerings.  As discussed in the T+1 Proposing Release, the T+1 

Report indicates that, under the existing T+4 settlement cycle for firm commitment offerings, most 

transactions currently settle on a T+2 basis.  Consistent with the comments received, the 

Commission believes that a T+2 settlement cycle for firm commitment offerings priced after 4:30 

p.m. ET provides sufficient time and flexibility to complete documentation and address any other 

issues that may arise in the preparation of a firm commitment offering to ensure timely settlement.   

5. Retention of Existing Exchange Act Rule 15c6-1(d) Unchanged 

Because the Commission is not deleting paragraph (c) of Rule 15c6-1, the Commission is 

not adopting the proposed technical changes to paragraph (d) of the rule.  The Commission did not 

                                                 
182  T+1 Proposing Release, supra note 2, at 10450. 

183  Id. at 10492. 



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propose any other changes to paragraph (d) of Rule 15c6-1, and the Commission received no 

comments recommending changes to this provision of the rule. 

The Commission agrees with the commenter stating that paragraph (d) should be 

retained184 because paragraph (d) enables underwriters and the parties to a transaction to agree, in 

advance of the transaction, to a settlement cycle other than the standard settlement cycle specified 

in either paragraph (a) or (c) of the rule, when necessary to manage obligations associated with the 

firm commitment offerings.  Market participants involved in firm commitment offerings of certain 

debt and preferred securities commonly rely on paragraph (d) of Rule 15c6-1 to extend settlement 

in order to allow time for the completion of the extensive documentation associated with such 

offerings,185 and the Commission believes it is not always possible for such documentation to be 

completed within the time frames provided by under paragraphs (a) and (c) of Rule 15c6-1.  

Therefore the amendments to Rule 15c6-1 being adopted in this document do not include any 

changes to paragraph (d) of the rule.  

6. Exemptive Orders under Exchange Act Rule 15c6-1(b) 

The Commission has reviewed the comments submitted in response to the T+1 Proposing 

Release that relate to the Commission’s existing exemptive orders issued pursuant to Exchange 

Act Rule 15c6-1(b),186 and, because no changes are needed to facilitate an orderly transition to a 

T+1 settlement cycle, the existing exemptive orders will remain in effect without modification.   

The Commission’s view that no changes to the orders are needed is consistent with the comments 

                                                 
184  See SIFMA April Letter, supra note 16, at 11. 

185  See T+1 Report, supra note 61, at 33.  

186  See supra notes 105 and 126.    



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urging that the Commission retain both the existing exemption for certain insurance products, as 

well as the exemption for certain foreign securities, as described above.187   

With respect to the comments recommending that the Commission expand the scope of the 

existing exemptive order relating to securities that do not have facilities for transfer or delivery in 

the U.S.,188 the Commission is not persuaded that expanding the scope of the order is necessary at 

this time and is declining to do so for the reasons discussed below.  However, the Commission will 

continue to monitor how shortening the standard settlement cycle to T+1 in the U.S. affects market 

participants.   

Notwithstanding the comments raising concerns that the existing exemption for certain 

foreign securities does not exempt ADRs from the T+1 standard settlement cycle,189 the 

Commission believes that ADRs should continue to be subject to Rule 15c6-1(a).  In response to 

one commenter’s statements relating to the timely sale of ADR transactions using newly created 

ADRs,190 the Commission understands that a large percentage of ADR trading activity involves 

purchases and sales of existing ADRs in the U.S. markets.  Thus, the commenter’s concerns would 

seem to relate to only a small percentage of ADR trading activity.191   

                                                 
187  See supra Part II.B.5. 

188  See SIFMA April Letter, supra note 16, at 8–9; ICI Letter, supra note 16, at 4. 

189  See SIFMA April Letter, supra note 16, at 8; ICI Letter, supra note 16, at 4. 

190  See SIFMA April Letter, supra note 16, at 8. 

191  See infra notes 606–616 (discussing the anticipated economic effect on transactions in 

ADRs).  



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The commenter stated that “[t]his type of trade” will not be possible if the underlying 

foreign shares settle on T+2 and the related ADR is required to settle on T+1, and the result is 

likely to be wider bid-ask spreads for the ADR because market makers must take into account the 

additional cost of borrowing securities and other financing costs to avoid settlement failures.192  

While bid-ask spreads could widen and costs could increase for this narrow category of ADR 

transactions, the Commission believes that ADRs should be subject to the requirements under Rule 

15c6-1(a).  Exempting ADRs from the requirements under Rule 15c6-1(a) would create another 

misalignment between the securities settlement cycle for ADRs and the standard settlement cycle 

for other types of securities, which the Commission believes would unduly dilute the benefits of a 

standard settlement cycle.  As a general matter, a standard settlement cycle facilitates operational 

efficiency, reduces operational costs and transaction costs, and reduces risk for market participants.   

In this particular case, the Commission believes that exempting ADRs from Rule 15c6-1(a) 

would diminish the benefits associated with shortening the standard settlement cycle to T+1.  As 

previously discussed in detail, such benefits include risk reduction (e.g., credit, market, liquidity 

and systemic risk), as well as increased capital efficiency. 

The Commission also does not agree with the commenter that it will be impossible for 

market makers and other market participants to purchase foreign shares and sell related ADRs in 

the U.S. on the same trading day, and thus timely settle the sale of the ADRs using the newly 

created ADRs.193  Rather, the Commission believes that market participants can borrow the 

underlying securities necessary to settle the newly created ADR on T+1 if the securities are 

                                                 
192  See id.; see also ICI Letter, supra note 16, at 4. 

193  See SIFMA April Letter, supra note 16, at 8. 



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available.  While the commenter also raises the concern that in some cases it will not be possible to 

borrow the securities to make delivery,194 the possibility that certain securities may be costly or 

difficult to borrow at certain times is not limited to ADRs.  As previously discussed, establishing a 

standard settlement cycle facilitates operational efficiency, reduces operational costs and 

transaction costs, and reduces risk for market participants.  Providing exemptions for securities that 

can be costly or difficult to borrow—when the cost or difficulty to borrow will vary over time in 

response to movements in the price of the security, a dynamic unrelated to the length of the 

settlement cycle—would erode these benefits.  

The Commission also has reviewed the comments urging the Commission to “exempt from 

T+1 settlement” U.S.-listed ETFs with baskets that contain foreign securities and ADRs,195 and has 

determined that such an exemption is not warranted at this time for reasons that are similar to those 

discussed above in response to the comments raising concerns regarding the impact the move to 

T+1 will have on market participants trading ADRs.  As a general matter, the Commission believes 

that allowing ETFs to settle on a settlement cycle that is longer than T+1 would diminish the 

benefits associated with a standard settlement cycle and shortening the standard settlement cycle to 

T+1. 

The Commission recognizes that settling trades in U.S.-listed ETFs with baskets that 

contain foreign securities may become more costly for certain APs in a T+1 environment, as result 

of the prospective misalignment between the settlement cycle for such trades and the settlement 

cycle for the underlying foreign securities.  For example, the Commission acknowledges that 

during the ETF share creation process, APs may need to post collateral or establish credit lines to 

                                                 
194  See id. 

195  See id.; ICI Letter, supra note 16, at 4. 



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satisfy foreign market requirements.  However, as previously discussed, the Commission believes 

that moving to a T+1 settlement cycle will reduce other costs (e.g., margin charges), increase 

capital efficiency, and reduce risk in the U.S. clearance and settlement system.196 

The Commission also disagrees with the comment stating that the prospective 

misalignment in settlement cycles may increase certain risks, such as failed trades, accrual 

differences, net asset value miscalculations, and investment guideline breaches.  Market 

participants will have many months to implement any operational requirements they identify 

associated with the move to a T+1 settlement cycle, including the operational requirements 

associated with the settlement of U.S.-listed ETFs with baskets that include foreign securities 

and/or ADRs.  The industry has already identified many such requirements,197 and the Commission 

believes that market participants will have sufficient time to complete the operational changes 

necessary to minimize these risks.  Moreover, as explained above,198 the Commission believes that 

shortening the settlement cycle will reduce certain risks for market participants overall (e.g., credit, 

market and liquidity risk), including these risks faced by APs. 

The Commission also does not believe that it is necessary at this time to amend the text of 

paragraph (b) of Rule 15c6-1 to codify the existing exemptive order for securities that do not have 

facilities for transfer or delivery in the U.S., or the existing exemptive order for certain insurance 

products.  As noted above, one commenter recommended that the existing exemptions “either be 

                                                 
196  See supra note 139 and accompanying text. 

197  See T+1 Playbook, supra note 134, at 33 (providing recommendations to improve timing in 

nightly batch cycles, make use of lines of credit to address the potential need for more collateral, 

and establishing connections for real-time messaging with NSCC). 

198  See supra note 139 and accompanying text. 



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codified in Rule 15c6-1(b), or the Commission issue a new order to replace the orders issued in 

1995 to facilitate access to the terms of the exemptions and to facilitate compliance with their 

terms.”199   

Since these orders were first issued in 1995, both orders have provided adequate regulatory 

relief to market participants who engage in transactions that the orders were intended to cover.  

Codifying the exemptions is not necessary to facilitate the transition to a T+1 settlement cycle, and 

the Commission is aware of no evidence that market participants lack knowledge of the terms of 

the exemptive orders or have been unable to comply with the orders because they have not been 

codified in Rule 15c6-1. 

III. Exchange Act Rule 15c6-2 – Same-Day Affirmation 

A. Proposed Rule 15c6-2 

The Commission proposed Rule 15c6-2 to require that, where parties have agreed to 

engage in an allocation, confirmation, or affirmation process, a broker or dealer would be 

prohibited from effecting or entering into a contract for the purchase or sale of a security (other 

than an exempted security, a government security, a municipal security, commercial paper, 

bankers’ acceptances, or commercial bills) on behalf of a customer unless such broker or dealer 

has entered into a written agreement with the customer that requires the allocation, confirmation, 

affirmation, or any combination thereof, be completed as soon as technologically practicable and 

no later than the end of the day on trade date in such form as may be necessary to achieve 

settlement in compliance with Rule 15c6-1(a).200   

                                                 
199  See supra note 128 and accompanying text.  

200  See T+1 Proposing Release, supra note 2, at 10453.Conformed to Federal Register version 

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In proposing Rule 15c6-2, the Commission did not define the terms “allocation,” 

“confirmation,” or “affirmation,” but explained that trade allocation refers to the process by which 

an institutional investor (often an investment adviser) allocates a large trade among various client 

accounts or determines how to apportion securities trades ordered contemporaneously on behalf of 

multiple funds or non-fund clients.201  The T+1 Proposing Release also explained that the terms 

“confirmation” and “affirmation” in proposed Rule 15c6-2 refer to the transmission of messages 

among broker-dealers, institutional investors, and custodian banks to confirm the terms of a trade 

executed for an institutional investor, a process necessary to ensure the accuracy of the trade being 

settled.  The Commission stated its belief that these terms are widely used and generally 

understood by market participants who engage in institutional trade processing.202 

In addition, in proposing Rule 15c6-2, the Commission used the term “confirmation” to 

refer to the operational message that includes trade details provided by the broker-dealer to the 

customer to verify trade information so that a trade can be prepared for settlement on the timeline 

established in Rule 15c6-1(a), in contrast to the confirmations required under Rule 10b-10, which 

concern a series of disclosures that broker-dealers are required to provide in writing to customers 

at or before completion of a transaction.203  The Commission explained that the term 

“confirmation,” as used in proposed Rule 15c6-2, should be understood to refer to the institutional 

trade processing message or verification and not the disclosure required under Rule 10b-10.204 

                                                 
201  Id. 

202  See id. 

203  See id. at 10453–54. 

204  See id. at 10454. 



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The Commission also explained that the term “customer,” as used in proposed Rule 15c6-2, 

includes any person or agent of such person who opens a brokerage account at a broker-dealer to 

effect an institutional trade or purchases or sells a security for which the broker-dealer receives or 

will receive compensation.205  The Commission stated that the term is intended to cover both the 

institutional investor and any and all agents acting on its behalf.206 

B. Comments 

1. Existing Commercial Incentives for Timely Trade Allocations, 

Confirmations, and Affirmations 

Two commenters stated that the written agreements required under proposed Rule 15c6-2 

are unnecessary to improve same-day affirmation rates because commercial incentives to achieve 

timely trade allocations, confirmations, and affirmations already exist.207  One commenter 

identified, for example, the following incentives for firms to achieve on-time settlement: increased 

cost of settling a trade without netting through the CCP; increased costs associated with the 

processing of trades that are not affirmed; costs associated with buy-ins for trades that are not 

settled on a timely basis; and the potential for customer dissatisfaction related to the failure to 

timely settle or the increased costs associated with such failure.208  The second commenter stated 

                                                 
205  See id. 

206  See id. 

207  See Fidelity Letter, supra note 16, at 3–4 (stating that proposed Rule 15c6-2 is not 

necessary because “market incentives already exist to timely allocate, confirm, and affirm trades”); 

letter from Tom Price, Managing Director, SIFMA (Aug. 26, 2022), at 2 (“SIFMA August 26th 

Letter”) (stating that written agreements, as proposed by Rule 15c6-2, are unnecessary because 

“there are many commercial incentives in place for industry participants to meet market standard 

settlement timelines”).  

208  See SIFMA August 26th Letter, supra note 207, at 2.  



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that it is in an institutional customer’s best interest to timely allocate, confirm, and affirm its 

trades, as doing so is the first step and a pre-condition to settling a trade.209  This commenter also 

stated more generally that financial disincentives for institutional customers that do not meet a 

same-day affirmation timeline already exist.210   

2. Linking Settlement Instructions to Affirmation 

In the T+1 Proposing Release, the Commission stated that broker-dealers are best 

positioned to ensure the timely settlement of institutional trades and, as such, should be able to 

ensure via their customer agreements that institutional customers or their agents also adjust their 

operations to facilitate same-day affirmation.211  In response to this statement, one commenter 

stated that settlement requires client instruction through a client’s agents, who are typically 

custodians, against a broker-dealer’s trades.212  The commenter also stated that, because custodians 

often act as an agent for institutional clients, custodians are highly dependent on the 

implementation of efficient and timely operating models and processes across market participants 

at the trading level, including institutional clients and broker-dealers, before they can effect 

settlement on their client’s behalf.213  In this regard, the commenter requested that the Commission 

consider requiring through Rule 15c6-2 the linking of settlement instructions to the affirmation.214 

                                                 
209  See Fidelity Letter, supra note 16, at 3.  

210  See id. 

211  See T+1 Proposing Release, supra note 2, at 10453. 

212  See AGC April Letter, supra note 16, at 3.  

213  See id.  

214  See id. at 2.  



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3. Definitions of Certain Terms 

In the T+1 Proposing Release, the Commission requested comment as to whether the terms 

“allocation,” “confirmation,” “affirmation,” “end of the day on trade date,” and “customer” should 

be defined for purposes of Rule 15c6-2.215  In response, one commenter agreed with the 

Commission’s view, as articulated in the T+1 Proposing Release, and expressed support for not 

defining these terms in the rule.216  This commenter stated that, because operational and 

technological processes and practices continually evolve across market participants who engage in 

institutional trade processing, the above terms are best grounded in the prevailing market practices 

and uses understood by these market participants.217  A second commenter, in contrast, stated that 

it would generally be helpful for the Commission to provide definitions of terms within the context 

of the proposed rule, even where such terms are commonly used in the industry.218  The 

commenter recommended that the Commission define each of the above terms for purposes of 

Rule 15c6-2 and suggested that the Commission also define the term “trade” because there are 

multiple uses of this term by the industry.219  The commenter further stated that the term 

                                                 
215  See T+1 Proposing Release, supra note 2, at 10455.  

216  See letter from Matthew Stauffer, Managing Director and Head of DTCC Institutional 

Trade Processing, DTCC ITP LLC (Apr. 11, 2022), at 3 (“DTCC ITP April Letter”).  

217  See id. (explaining that by not prescribing definitions for the key terms used in proposed 

Rule 15c6-2, the Commission would allow such terms to continue to evolve).  

218  See letter from Jim Kaye, Americas Regional Director, FIX Trading Community (Apr. 11, 

2022), at 2–3 (“FIX Trading Letter”).  

219  See id.  The commenter provided suggested definitions for the terms “allocation,” 

“confirmation,” and “affirmation” and recommended that the term “end of the day on trade date” 

be defined as a specific time of day together with its time zone.  Id. at 2. 



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“affirmation” is open to some interpretation and suggested that the Commission define this term in 

particular.220   

4. Use of Third Parties to Achieve Same-Day Affirmation 

One commenter requested that the Commission clarify whether, under proposed Rule 15c6-

2, an investment adviser that has entered into an agreement with a broker-dealer pursuant to the 

proposed rule may rely on a third party—such as a third party order management system, sub-

adviser, or custodian—to allocate or affirm trades.221  This commenter, in a later letter, stated that 

“upon further analysis, we understand that requiring advisers to enter into specific contractual 

arrangements would create significant challenges for advisers,” and recommended that the 

Commission replace the proposed requirement of a written agreement with a requirement that 

investment advisers adopt and implement policies and procedures reasonably designed to ensure 

that allocations, confirmations, and affirmations are completed on a timeline that allows settlement 

on T+1.222  As the commenter explained, this approach would “relieve investment advisers, when 

they are parties to an allocation, confirmation, and affirmation process, from the burden of 

negotiating and having to regularly update written agreements,” and “create incentives for 

investment advisers to work with broker-dealers and other third parties to complete the process in a 

                                                 
220  See id. at 2. 

221  See IAA April Letter, supra note 16, at 3–4. 

222  See letter from Gail C. Bernstein, General Counsel, and William A. Nelson, Associate 

General Counsel, Investment Adviser Association (Oct. 19, 2022), at 1–2 (“IAA October Letter”). 



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timely manner while allowing them greater flexibility to comply in a manner best suited to their 

existing infrastructure, clients, and resource levels.”223   

5. Challenges Associated with Requiring Written Agreements in Support of 

Increasing Same-Day Affirmations 

Although commenters generally supported the Commission’s overall goal of increasing 

same-day affirmations, several commenters expressed a number of concerns with the written 

agreement requirement in proposed Rule 15c6-2.224  First, commenters stated that in many 

scenarios written agreements do not currently exist between the parties to an institutional 

transaction and would be highly burdensome to establish specifically for the purpose of facilitating 

same-day affirmation.  For example, two commenters explained that agreements do not exist 

because the parties engage in their transactions on a receive-versus-payment/deliver-versus-

payment (“RVP/DVP”) basis without an underlying agreement.225  In an RVP/DVP transaction, 

securities are only delivered by the seller when payment has been made by the buyer.     

Some commenters explained that where written agreements do not already exist, the parties 

would need to draft new agreements solely for the purpose of compliance with the rule.226  In this 

regard, commenters stated that, as proposed, Rule 15c6-2 would result in burdensome, time 

consuming, and costly contract negotiations, as broker-dealers would have to enter into a new or 

                                                 
223  Id. 

224  See ASA Letter, supra note 16, at 2; Fidelity Letter, supra note 16, at 3–4; IAA October 

Letter, supra note 222, at 1–3; ICI Letter, supra note 16, at 5–7; ISITC Letter, supra note 29, at 2; 

MarketAxess Letter, supra note 29, at 2–3; SIFMA April Letter, supra note 16, at 5–6; State Street 

Letter, supra note 16, at 4; Virtu Financial Letter, supra note 16, at 3. 

225  See Fidelity Letter, supra note 16, at 4; SIFMA April Letter, supra note 16, at 5. 

226  See ISITC Letter, supra note 29, at 2; Fidelity Letter, supra note 16, at 4.  



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amended written agreement with each of their institutional customers.227  Moreover, another 

commenter stated that certain clients may not authorize their investment advisers to enter into the 

type of written agreement required under proposed Rule 15c6-2, while other clients may insist on 

negotiating bespoke guideline requirements, such as arbitration or governing law, into their written 

agreements.228  Multiple commenters further expressed the view that the proposed written 

agreement requirement would create unnecessary practical burdens and costs.229  Several of these 

commenters stated that it would be impracticable for institutional customers to enter into such 

agreements because they often rely on other parties to complete certain elements of the allocation, 

confirmation, and affirmation process.230  One of these commenters stated more generally that a 

requirement for broker-dealers to enter into a written agreement with each of their institutional 

customers is not practically feasible.231  One commenter also observed that it is unclear under 

proposed Rule 15c6-2 whether broker-dealers should be entering into the written agreements with 

the investment advisers or with their customers.232  

                                                 
227  See ICI Letter, supra note 16, at 5–6; MarketAxess Letter, supra note 29, at 2–3; SIFMA 

April Letter, supra note 16, at 5–6. 

228  See SIFMA April Letter, supra note 16, at 5. 

229  See ASA Letter, supra note 16, at 2; ICI Letter, supra note 16, at 5; SIFMA April Letter, 

supra note 16, at 5; Virtu Financial Letter, supra note 16, at 3.  

230  See ICI Letter, supra note 16, at 5; SIFMA April Letter, supra note 16, at 5; Virtu Financial 

Letter, supra note 16, at 3. 

231  See ASA Letter, supra note 16, at 2. 

232  See SIFMA April Letter, supra note 16, at 5. 



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Multiple commenters expressed a separate concern that proposed Rule 15c6-2 would 

expose a non-breaching broker-dealer to potential liability if its customer, or customer’s agent, 

breaches the written agreement, even if through no fault of the broker-dealer.233  In raising this 

concern, some commenters stated that the proposed rule does not specify what should happen if 

the broker-dealer’s customer or its agent breaches the written agreement, which may put broker-

dealers in the difficult position of trying to regulate the conduct of their customers through 

commercial contracts.234  Another commenter also observed that the proposed rule would place the 

compliance burden on broker-dealers, even though the customer—and not the broker-dealer—has 

the necessary information to complete the allocation, confirmation, and affirmation process.235  

However, under proposed Rule 15c6-2, a broker-dealer is only responsible for its own actions and 

not for the actions of its customers or any other relevant parties to an institutional transaction, as 

discussed further in Part III.C.     

Further, several commenters expressed the view that a written agreement requirement, as 

proposed in Rule 15c6-2, would not be an effective approach for achieving the Commission’s 

                                                 
233  See Fidelity Letter, supra note 16, at 4; MarketAxess Letter, supra note 29, at 3; SIFMA 

April Letter, supra note 16, at 6; Virtu Financial Letter, supra note 16, at 3. 

234  See Fidelity Letter, supra note 16, at 4 (questioning whether, under proposed Rule 15c6-2, 

a broker-dealer would be subject to SEC enforcement if it failed to enforce private contractual 

provisions with its customers regarding same-day affirmation); MarketAxess Letter, supra note 29, 

at 3 (stating that broker-dealers are not regulators and, as such, cannot force their customers to 

upgrade their technology or processes to achieve same-day affirmations).  

235  See SIFMA April Letter, supra note 16, at 6.  



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overall goal of increasing same-day affirmations.236  One commenter observed, for example, that a 

written agreement requirement is unnecessary because the industry recognizes the importance of 

same-day affirmations and is actively working toward achieving same-day allocations, 

confirmations, and affirmations.237  In this regard, some commenters recommended that the 

Commission revise proposed Rule 15c6-2 to replace the written agreement requirement with a 

requirement that broker-dealers establish written policies and procedures reasonably designed to 

achieve same-day affirmation.238  Some of these commenters further stated that such a principles-

based approach would relieve the parties to an institutional transaction from the burden of 

negotiating a written agreement; incentivize broker-dealers to work with their customers to 

complete the allocation, confirmation, and affirmation process in a timely manner; and afford 

broker-dealers more flexibility to comply with the rule in a manner best suited to their specific 

business models, customer bases, and products.239 

Finally, two commenters indicated that the proposed requirement for written agreements in 

Rule 15c6-2 may encourage parties to cancel their transactions before the end of trade date when 

                                                 
236  See ASA Letter, supra note 16, at 2; ICI Letter, supra note 16, at 5; ISITC Letter, supra 

note 29, at 2; MarketAxess Letter, supra note 29, at 3; SIFMA April Letter, supra note 16, at 5; 

State Street Letter, supra note 16, at 4.  

237  See ICI Letter, supra note 16, at 7.  

238  See ASA Letter, supra note 16, at 2; ICI Letter, supra note 16, at 7; MarketAxess Letter, 

supra note 29, at 3; SIFMA April Letter, supra note 16, at 6; State Street Letter, supra note 16, at 

4; Virtu Financial Letter, supra note 16, at 3; see also IAA October Letter, supra note 222, at 1–2; 

SIFMA August 26th Letter, supra note 207, at 2.  

239  See ICI Letter, supra note 16, at 7; MarketAxess Letter, supra note 29, at 3; SIFMA April 

Letter, supra note 16, at 6; see also IAA October Letter, supra note 222, at 2–3; SIFMA August 

26th Letter, supra note 207, at 2. 



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an allocation, confirmation, or affirmation cannot be completed to avoid violating the proposed 

rule.240    

6. End-of-Day Trading, Transactions Across Multiple Time Zones, and 

Variations in Local Holidays as Obstacles to Same-Day Affirmation 

Several commenters raised concerns about certain obstacles—such as end-of-day trading, 

transactions across multiple time zones, and variations in holiday schedules—that could interfere 

with achieving same-day affirmation under proposed Rule 15c6-2.241  One commenter stated that, 

given time zone differences, a non-U.S. investment manager might not be able to fill and execute 

its U.S. securities transactions before its local close of business and, therefore, would not be able to 

achieve same-day affirmation.242  Another commenter indicated that same-day affirmation may be 

difficult to achieve for those in the same or similar time zones for trades occurring at or near the 

U.S. market close, and that same-day affirmation may not be feasible for those located in time 

zones several hours ahead of the U.S., as new cut-off times would occur late into their 

overnight.243  Some commenters stated that investment advisers and their clients often rely on 

other parties to complete certain aspects of the allocation, confirmation, and affirmation process 

and, in doing so, are subject to the time zones and local holiday schedules in the countries where 

                                                 
240  See ICI Letter, supra note 16, at 7; Virtu Financial Letter, supra note 16, at 3.  

241  See AIMA Letter, supra note 29, at 2, 6–7; ISITC Letter, supra note 29, at 6; SIFMA April 

Letter, supra note 16, at 5; Virtu Financial Letter, supra note 16, at 3.  

242  See ISITC Letter, supra note 29, at 6.  

243  See AIMA Letter, supra note 29, at 2, 6–7.  



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these other parties operate, which could prevent achieving same-day affirmation.244  The same 

commenters requested that the Commission modify proposed Rule 15c6-2 to offer broker-dealers 

some flexibility in situations where same-day affirmation cannot be achieved because of 

circumstances that are beyond their control.245  In this regard, some commenters recommended that 

the Commission replace the written agreement requirement in proposed Rule 15c6-2 with a 

requirement that broker-dealers adopt written policies and procedures to facilitate same-day 

affirmation.246   

7. Alternative Rule Recommended in SIFMA August Letter 

The Commission received an additional comment letter from SIFMA addressing 

alternatives to proposed Rule 15c6-2.247  SIFMA recommended that the Commission revise 

proposed Rule 15c6-2 to replace the written agreement requirement with a requirement for policies 

and procedures to support faster processing, as it would allow individual firms to design policies 

and procedures tailored to their business models, products, and unique customer bases while 

advancing the Commission’s interest in same-day affirmation.248  The Commission generally 

agrees that requiring broker-dealers to establish, maintain, and enforce policies and procedures for 

                                                 
244  See ICI Letter, supra note 16, at 5–6; SIFMA April Letter, supra note 16, at 5; Virtu 

Financial Letter, supra note 16, at 3. 

245  See ICI Letter, supra note 16, at 7; SIFMA April Letter, supra note 16, at 5; Virtu Financial 

Letter, supra note 16, at 3. 

246  See ICI Letter, supra note 16, at 7; SIFMA April Letter, supra note 16, at 5; Virtu Financial 

Letter, supra note 16, at 3. 

247  See SIFMA August 26th Letter, supra note 207, at 2–3.  

248  See id. at 2.  In Part III.B.5 above, the Commission has previously discussed why it 

believes it appropriate to retain the written agreement requirement in the rule, while also adding an 

option to establish, maintain, and enforce written policies and procedures.  



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achieving same-day affirmation is an effective way to improve affirmation rates because it 

promotes an orderly settlement process, thereby helping to ensure timely settlement in a shortened 

settlement cycle.  The Commission also believes that establishing, maintaining, and enforcing 

policies and procedures as an alternative approach to compliance aside from entering into written 

agreements enables broker-dealers to avoid the substantial burdens and challenges that may be 

associated with negotiating written agreements in some cases.  Nonetheless, as previously 

discussed in Part III.B.5 above, the Commission also believes that it is appropriate to retain the 

requirement for written agreements as one of two options for broker-dealers to achieve compliance 

with Rule 15c6-2. 

SIFMA’s recommendation included a number of elements.  First, SIFMA requested that 

Rule 15c6-2 be revised to require broker-dealers to establish, document, and uphold policies and 

procedures reasonably designed to maintain timely settlement rates.249  Second, SIFMA 

recommended that such policies and procedures: (i) address the timing of allocations, 

confirmations, and affirmations to ensure timely settlement; (ii) include a communication plan 

with market participants; (iii) provide a description of a broker-dealer’s ability to monitor 

compliance; (iv) include the development of controls and supervisory procedures; and (v) include 

the development of metrics to measure compliance.250  The Commission generally agrees with 

SIFMA’s approach and, as discussed in Part III.C below, is revising final Rule 15c6-2 to allow 

broker-dealers to achieve compliance with the rule either by (1) entering into written agreements 

or (2) establishing, maintaining, and enforcing reasonably designed policies and procedures.  

Below, the Commission discusses each of SIFMA’s recommendations in turn. 

                                                 
249  See id. 

250  See id. at 2–3.  



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First, SIFMA requested that Rule 15c6-2 be revised to require broker-dealers to establish, 

document, and uphold policies and procedures reasonably designed to maintain timely settlement 

rates.251  While the Commission agrees that a policies and procedures approach can also advance 

the Commission’s same-day affirmation objective, the Commission believes that timely settlement 

is a separate, if related, objective from same-day affirmation.  Commission rules have long 

established the standard for timely settlement, as reflected by the requirements for the standard 

settlement cycle set forth in Rule 15c6-1.  In contrast, Rule 15c6-2, as proposed, seeks to advance 

the objective of same-day affirmation.  As discussed further in Part III.C, the Commission believes 

that improving affirmation rates on trade date is an objective separate and apart from, if 

nonetheless related to, shortening the settlement cycle because it promotes an orderly settlement 

process regardless of the length of the settlement cycle.  In the T+1 Proposing Release, the 

Commission stated that, while proposed Rule 15c6-2 does not require settlement of the transaction 

on trade date, the requirement for same-day affirmation supports orderly settlement by reducing 

the likelihood of exceptions or other processing errors that can lead to settlement fails.252  The 

Commission recognizes that Rule 15c6-1 already addresses the concept of timely settlement by 

establishing a standard settlement cycle.  As a result, the Commission believes that, while 

proposed Rule 15c6-2 should be revised to incorporate a policies and procedures approach, the 

specific objective of same-day affirmation, and not the more general objective of timely 

settlement, remains the objective that such policies and procedures should be reasonably designed 

to achieve. 

                                                 
251  Id. at 2. 

252  See T+1 Proposing Release, supra note 2, at 10454–55.  



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Second, SIFMA suggested that policies and procedures be designed to address the timing 

of allocations, confirmations, and affirmations to ensure timely settlement.253  The Commission 

agrees that addressing the timing of allocations, confirmation, and affirmations on trade date can 

help advance the objective of same-day affirmation, and, as discussed further in Part III.C below, 

the Commission is including in the final rule a requirement for policies and procedures to include 

target time frames on trade date for achieving allocations, confirmations, and affirmations.254 

Third, SIFMA suggested that policies and procedures be designed to include a 

communication plan with market participants.255  The Commission agrees with this suggestion, 

and, as discussed further in Part III.C below, the Commission is including in the final rule a 

requirement for reasonably designed policies and procedures that include the procedures the 

broker-dealer will follow to ensure the prompt communication of trade information, investigate 

any discrepancies in trade information, and adjust trade information to help ensure that the 

allocation, confirmation, and affirmation process can be completed by the target time frames on 

trade date.256 

Finally, SIFMA suggested that the policies and procedures be designed to provide a 

description of a broker-dealer’s ability to monitor compliance, include the development of controls 

and supervisory procedures, and include the development of metrics to measure compliance.257  

The Commission also agrees that these elements can ensure that policies and procedures are 

                                                 
253  See SIFMA August 26th Letter, supra note 207, at 2.  

254  See Rule 15c6-2(b)(2). 

255  See SIFMA August 26th Letter, supra note 207, at 2. 

256  See Rule 15c6-2(b)(3). 

257  See id. at 2–3.  



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effective at helping to ensure that allocations, confirmations, and affirmations can be completed on 

trade date.  Accordingly, and as discussed further in Part III.C below, the Commission is including 

in the final rule similar requirements as those described by SIFMA for reasonably designed 

policies and procedures that identify and describe any technology systems, operations, and 

processes used to coordinate with relevant parties to ensure completion of the allocation, 

confirmation, or affirmation process;258 describe how the broker-dealer plans to identify and 

address delays;259 and measure, monitor, and document the rates of allocations, confirmations, and 

affirmations completed as soon as technologically practicable and no later than the end of trade 

date.260 

C. Final Rule and Discussion 

After considering the above comments, the Commission continues to believe that 

implementing a T+1 standard settlement cycle will require significant improvements in the current 

rates of same-day affirmations to help ensure timely settlement in a T+1 environment.261  Although 

the Commission agrees that the incentives identified by commenters in Part III.B.1 exist and help 

ensure timely settlement, the Commission believes that these incentives alone are insufficient to 

significantly improve same-day affirmation rates, as required to facilitate shortening the standard 

                                                 
258  See Rule 15c6-2(b)(1). 

259  See Rule 15c6-2(b)(4). 

260  See Rule 15c6-2(b)(5). 

261  See T+1 Proposing Release, supra note 2, at 10453.  



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settlement cycle to T+1.262  While data cited in the T+1 Proposing Release indicates that 

affirmation rates have improved over time, the improvements have been only modest.263  

Currently, despite existing commercial incentives and efforts to establish “same-day affirmation” 

as an industry best practice, only about 68% of trades achieve affirmation on trade date.264  

Because the above incentives and efforts, on their own, have not sufficiently improved the current 

rate of same-day affirmations, the Commission believes that additional regulatory steps—including 

establishing a Commission requirement designed to advance the same-day affirmation objective—

are needed.  In this way, a Commission rule effectively targeted to the same-day affirmation 

objective can increase the rate of same-day affirmation for several reasons.265   

First, in the absence of such a rule, the existing incentives identified by commenters tend 

only to impose substantial costs on the parties if a transaction fails to settle on time (i.e., pursuant 

to the standard settlement cycle set forth in Rule 15c6-1(a)).  However, failing to affirm by the end 

of trade date increases the likelihood that errors or exceptions will not be resolved in time for 

settlement.  The sooner the parties have affirmed the trade information for their transaction, the 

                                                 
262  See T+1 Report, supra note 61, at 13 (highlighting the need for achieving affirmation on 

trade date and encouraging that affirmations be completed by 9:00 p.m. ET on trade date to 

facilitate shortening the standard settlement cycle to T+1).  

263  T+1 Proposing Release, supra note 2, at 10453 n.156 (citing DTCC, Proposal to Launch a 

New Cost-Benefit Analysis on Shortening the Settlement Cycle (Dec. 2011), available at 

https://www.dtcc.com/en/news/2011/december/01/proposal-to-launch-a-new-costbenefit-analysis-

on-shortening-the-settlementcycle.aspx).  

264 See Sean McEntee, Executive Director, ITP Product Management, DTCC, Remarks at the 

DTCC ITP Forum – Americas (June 17, 2021) (“DTCC ITP Forum Remarks”), available at 

https://www.dtcc.com/events/archives. 

265  See infra notes 578–581 and accompanying text (discussing the anticipated economic 

benefits of Rule 15c6-2 for the rate of same-day affirmations). 

https://www.dtcc.com/en/news/2011/december/01/proposal-to-launch-a-new-costbenefit-analysis-on-shortening-the-settlementcycle.aspx
https://www.dtcc.com/en/news/2011/december/01/proposal-to-launch-a-new-costbenefit-analysis-on-shortening-the-settlementcycle.aspx
https://www.dtcc.com/events/archives


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lower the likelihood of a settlement fail because the parties will have more time to identify and 

resolve any potential errors.  Second, many institutional transactions are not eligible for netting 

through the CCP because the relevant securities are held by a custodian bank that is not a CCP 

participant, and so market participants that use such a custodian do not have the option for—or the 

accompanying incentive to complete allocations, confirmations, and affirmations by the 

submission times that would facilitate—netting at the CCP.266  While industry planning for T+1 

does contemplate creating new incentives to specifically induce same-day affirmations by certain 

cutoff times,267 even when the transaction will not be submitted to the CCP for netting, the 

associated costs for failing to meet such cutoff times are likely to be minor in comparison to the 

costs associated with a failure to settle the transaction.268  As a result, market participants may not 

take steps to realize the benefits that accrue from achieving allocations, confirmations, and 

                                                 
266  NSCC and DTCC ITP jointly offer an optional service called “ID Net” for transactions 

affirmed by DTCC ITP.  The service enables broker-dealers who are members of both NSCC and 

DTC to aggregate and net for delivery purposes their institutional transactions, affirmed via DTCC 

ITP, with their transactions pending for settlement in NSCC’s Continuous Net Settlement (“CNS”) 

system.  See DTCC, ID Net, https://www.dtcc.com/settlement-and-asset-services/settlement/id-net.  

Nevertheless, such affirmed transactions are not guaranteed by NSSC and NSCC does not provide 

any margin offset to the broker-dealers’ clearing fund requirements.  See Exchange Act Release 

No. 93070 (Sept. 20, 2021), 86 FR 53125 (Sept. 24, 2021) (SR-NSCC-2021-011) (approving 

NSCC rule change to remove ID Net transactions from required fund deposit calculations). 

267  See T+1 Report, supra note 61, at 13–14 (for a T+1 settlement cycle, encouraging 

allocations be complete by 7:00 p.m. ET on trade date and recommending a new affirmation cutoff 

time of 9:00 p.m. ET on trade date).  

268  Specifically, failing to submit allocation, confirmation, and affirmation data by the cutoff 

time will likely require a participant to submit the transaction manually to DTC, raising the cost of 

the transaction.  See infra note 269 and accompanying text (discussing the different fees that DTC 

applies depending on the timing or method of submission for settlement).  If, a market participant 

fails to settle the transaction, however, it may be subject to buy-in obligations, whereby the market 

participant may need to internalize not just the cost of completing the transaction manually but also 

the cost of replacing the trade to the extent that the market price of the transaction has moved 

against the market participant since trade execution. 

https://www.dtcc.com/settlement-and-asset-services/settlement/id-net


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affirmations on trade date, even when they are subjected to costs that arise from failing to achieve 

timely settlement.  Third, the costs associated with failing to affirm a transaction, or with failing to 

achieve a buy-in, can be shifted among the parties settling the transaction, reducing the likelihood 

that these incentives will induce the parties to identify potential improvements to their processes 

over time because they do not internalize the full costs of failing to complete the allocation, 

confirmation, and affirmation process on trade date.  In addition, because of the costs associated 

with improving processes and implementing new technologies, these incentives may only induce 

change when a broker-dealer is engaged in a high volume of transactions for which errors are 

recurring and is also internalizing the costs associated with correcting those errors.  Otherwise, a 

broker-dealer and the relevant parties may deploy “just in time” solutions, where the allocation, 

confirmation, and affirmation process is completed on settlement date or never completed, while 

shifting any higher costs associated with ensuring the timely settlement of the transaction to 

others.269     

In proposing a requirement for written agreements, the Commission intended for the 

relevant parties, through these agreements, to establish more thoughtful and orderly processes—

established prior to trade execution—so that the parties to the transaction and their agents would 

have a shared understanding as to what steps were necessary to ensure that allocations, 

confirmations, and affirmations could be completed across the range of transactions into which 

                                                 
269  See, e.g., DTCC, Guide to the 2023 DTC Fee Schedule, https://www.dtcc.com/-

/media/Files/Downloads/legal/fee-guides/DTC-Fee-Schedule.pdf (setting different prices for night 

deliver orders, day deliver orders, matched institutional trades, and exceptions processing). 

https://www.dtcc.com/-/media/Files/Downloads/legal/fee-guides/DTC-Fee-Schedule.pdf
https://www.dtcc.com/-/media/Files/Downloads/legal/fee-guides/DTC-Fee-Schedule.pdf


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they enter, and what consequences would result if a party (or its agent) failed to provide the 

necessary allocation, confirmation, or affirmation no later than the end of trade date.270   

In addition, the Commission believes that it is appropriate to impose obligations on a 

broker-dealer, even though the broker-dealer is only responsible for its own actions and not for the 

actions of others under Rule 15c6-2, because the broker-dealer has the ability, in some 

circumstances, to modify the conduct of the other relevant parties with which the broker-dealer 

may participate in the allocation, confirmation, and affirmation process to ensure its own 

compliance with the rule.  As a result, the Commission believes that imposing such obligations on 

broker-dealers can increase the rate of same-day affirmation for institutional transactions,271 

thereby promoting the timely and orderly settlement of securities transactions, because many 

broker-dealers will have relationships across multiple advisers, custodians, and other types of 

agents, and therefore can introduce better processes and procedures across a range of different 

relationships.  Although the broker-dealer ultimately may not be in a position to bind the behavior 

of others,272 the Commission believes that market participants are generally aligned in support of 

                                                 
270  To promote such preparation ex ante, the Commission has modified the final rule to enable 

broker-dealers to pursue a policies and procedures approach as an alternative to written 

agreements.  See infra Part III.C.2 (discussing the policies and procedures alternative). 

271  To measure progress on the same-day affirmation objective, the Commission is also 

adopting a requirement for CMSPs to submit to the Commission an annual report on straight-

through processing that is required to include data on the rate of allocations, confirmations, and 

affirmations, enabling the Commission to measure progress on these metrics over time.  See infra 

Part V.C.2.c) (discussing the data elements required in the annual report, which include data 

concerning allocations, confirmations, and affirmations). 

272  Nonetheless, brokers do design their fees, in part, to address the risks that they face, 

including settlement risk.  See infra notes 567–568 and accompanying text (explaining that broker-

dealers set their fees, in part, to manage settlement risks).  Broker-dealers may determine to raise 

the cost of trading for customers that do not facilitate same-day affirmation pursuant to a broker-

dealer’s written agreements or written policies and procedures, as applicable.  



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facilitating same-day allocations, confirmations, and affirmations for their transactions to the 

greatest extent possible.  The Commission believes that same-day affirmation is an important 

objective that can facilitate an orderly and efficient transition to a T+1 and shorter settlement 

cycles, and that Rule 15c6-2 will incentivize broker-dealers to identify and deploy effective 

practices for achieving allocations, confirmations, and affirmations ex ante, thereby improving the 

rate of allocations, confirmations, and affirmations over time.   

As explained in the T+1 Proposing Release, the compliance burden imposed on broker-

dealers by Rule 15c6-2 is to have a written agreement in place with its customers that requires that 

the allocation, confirmation, and affirmation process be completed as soon as technologically 

practicable and no later than the end of the day on trade date in such form as may be necessary to 

achieve settlement in compliance with Rule 15c6-1(a).273  In the Commission’s view, even a 

simple requirement to have an agreement in place can effectively promote same-day affirmation 

because it helps ensure that the parties to a transaction where allocation, confirmation, or 

affirmation will occur have agreed in advance of entering the transaction as to the operational 

arrangements necessary to ensure the allocation, confirmation, or affirmation of the transaction.  

Rule 15c6-2 would not expose a non-breaching broker-dealer to liability for violating the rule 

based on the actions of its customer, or customer’s agent, provided that the written agreement 

describes the obligations of the parties to ensure the allocation, confirmation, or affirmation of the 

transaction, and the broker-dealer itself has complied with its obligations under the written 

agreement.  The Commission understands that commercial relationships between broker-dealers 

and other parties, such as investment advisers, often describe and, when possible, quantify 

expectations between the parties as to the timing of and other circumstances affecting the transfer 

                                                 
273  See T+1 Proposing Release, supra note 2, at 10453.Conformed to Federal Register version 

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of securities and funds, establishing costs and other terms that may apply if one of the parties to the 

agreement fails to meet its obligations for a certain threshold of transactions within a certain 

timeframe.  Adding a contractual requirement for the same-day allocation, confirmation, and 

affirmation of institutional transactions that would be executed and settled as part of such 

commercial relationship, in the Commission’s view, is likely to increase the percentage of 

transactions for which allocations, confirmations, and affirmations are completed on trade date. 

As a general matter, the Commission acknowledges that some of the incentives identified 

by commenters may better align with the objective of same-day affirmation in a T+1 environment 

than in a T+2 environment because market participants are likely to endeavor to submit trades that 

are eligible for netting to the CCP for settlement during a new overnight process planned for the 

evening of trade date,274 a process that would be unavailable unless the parties complete trade 

allocations, confirmations, and affirmations on trade date.  As stated by some commenters, the 

final design of deadlines and related operational requirements at the CCP, and at the industry level 

more generally, will encourage market participants to improve the rate of allocations, 

confirmations, and affirmations completed on trade date, as will the shortening of the settlement 

cycle more generally.275  Nonetheless, the Commission believes that final Rule 15c6-2, modified 

as discussed further below, can help ensure that incentives with respect to allocations, 

confirmations, and affirmations are aligned with timely and orderly settlement, critical to ensuring 

that the rate of settlement fails remains low as the settlement cycle continues to shorten.276 

                                                 
274  See T+1 Report, supra note 61, at 13.  

275  See supra Part III.B.1 (discussing these comments). 

276  See infra note 272 (discussing the ability of broker-dealers to use their schedule of fees to 

impose costs on customers or agents thereof that prevent completion of the allocation, 

confirmation, and affirmation process on trade date). 



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On balance, the Commission believes that final Rule 15c6-2, with the modifications 

discussed below to address specific concerns raised by commenters, will increase the incentive to 

submit allocations, confirmations, and affirmations on trade date, discouraging “just in time” 

solutions that may jeopardize timely settlement in a T+1 environment.  In particular, the 

Commission believes that “just in time” solutions may increase the rate of settlement fails in a T+1 

environment because the parties to a transaction will have significantly less time to resolve issues 

that can prevent settlement, raising the possibility that errors associated with the allocation, 

confirmation, and affirmation process may delay timely settlement.  Improving the rate of same-

day affirmations thereby promotes an orderly and efficient settlement process.  More generally, as 

discussed in the T+1 Proposing Release, agreeing to trade information as close in time as is 

technologically practicable to trade execution helps ensure that any discrepancies in trade details 

are identified and resolved far enough in advance to ensure timely and orderly settlement.277  In 

this way, Rule 15c6-2 can promote an orderly and efficient process in a T+1 environment because 

it substantially increases incentives for market participants to complete the key task of agreeing to 

trade information, including the price of the transaction and quantity of shares to be transferred, on 

trade date. 

1. Modifications to Requirement for Written Agreements 

The Commission is adopting Rule 15c6-2 with several modifications.  First, with respect to 

the requirement to enter written agreements to ensure the completion of the allocation, 

confirmation, affirmation, or any combination thereof, for the transaction as soon as 

technologically practicable and no later than the end of the day on trade date in such form as 

necessary to achieve settlement of the transaction, the Commission is revising the rule to replace 

                                                 
277  See T+1 Proposing Release, supra note 2, at 10454–55.  



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references in the text to “customer” with “relevant parties” to better align the obligations under 

Rule 15c6-2 with the market dynamics that currently exist between broker-dealers, their 

customers, and their customers’ use of advisers, custodians, and other third party agents as they 

participate in post-trade processes, including the allocation, confirmation, and affirmation process.   

The Commission believes that this modification helps reduce the likelihood that broker-

dealers would need to enter into new agreements with their customers specifically for the purpose 

of ensuring the same-day affirmation of the transaction.  It also removes the need for a broker-

dealer to enter into an agreement with its customer specific to same-day affirmation if a third-

party, such as an adviser, custodian or other agent of its customer, would be the party to engage 

with the broker-dealer to ensure the allocation, confirmation, or affirmation of the transaction.  As 

discussed in the T+1 Proposing Release,278 the Commission intended for “customer” to include the 

relevant parties to a transaction that would participate in the allocation, confirmation, and 

affirmation process and would include the customer, the customer’s investment adviser, the 

customer’s custodian, or any other agent acting (directly or indirectly) on behalf of the customer.  

The modification helps ensure that, when a broker-dealer is considering whether and with which 

entities to enter into written agreements, the broker-dealer needs to identify only the relevant party 

or parties that will have a role or roles in completing the allocation, confirmation and affirmation 

process.  The Commission also believes that this modification helps ensure that Rule 15c6-2 is 

appropriately designed to impose a written agreement requirement where a written agreement is 

practical and can help ensure the same-day affirmation of a transaction, even if many broker-

dealers may ultimately choose to implement the rule through the policies and procedures 

alternative discussed in Part III.C.2. 

                                                 
278  See T+1 Proposing Release, supra note 2, at 10454; see also Part III.A.  



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The Commission’s understanding is that, even if such party is not the broker-dealer’s own 

customer, some broker-dealers may choose to enter into commercial agreements with such other 

relevant parties in order to support their customer relationships, collect fees, and otherwise 

facilitate the operational processes necessary to complete and settle the transaction.  Rule 15c6-2 

does not require, however, that a broker-dealer enter into written agreements with parties that do 

not have a role in the allocation, confirmation, and affirmation process.  For example, if a broker-

dealer is acting in the capacity of an executing broker on behalf of a customer and another broker-

dealer will take responsibility for completing the allocation, confirmation, and affirmation process 

with the relevant parties to settle the transaction (a “clearing broker” in this context), then the 

executing broker need only comply with the rule to the extent that it participates in the allocation, 

confirmation, and affirmation process.  An executing broker that does not participate in such 

processes would face no obligations under the rule.  If an executing broker does undertake certain 

obligations with respect to its customer, such as may be delineated in its commercial arrangements 

with the relevant clearing broker, then under Rule 15c6-2 such a broker-dealer generally should 

ensure that its arrangements with the clearing broker identify that the clearing broker will be the 

broker-dealer “engaging in the allocation, confirmation, and affirmation process” for compliance 

with Rule 15c6-2.  If the executing broker and the clearing broker do not have written agreements 

that establish the commercial relationship between them, then the executing broker generally 

should consider whether it needs to establish, implement, and maintain policies and procedures to 

identify and explain its role and its relationship with the clearing broker, consistent with Rule 

15c6-2(a)(2), discussed in Part III.C.2.  In contrast to an executing broker—which may not 

participate in the allocation, confirmation, and affirmation process—the clearing broker that 



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facilitates the settlement of the transaction, and thereby participates in the allocation, confirmation, 

and affirmation process, would need to comply with Rule 15c6-2. 

Second, the Commission is making other technical changes to the written agreements 

requirement to simplify the rule text and to accommodate the new alternative for broker-dealers to 

establish, maintain, and enforce written policies and procedures to ensure completion of the 

allocation, confirmation and affirmation as soon as technologically practicable and no later than 

the end of the day on trade date.279  The Commission is removing the prohibition language in the 

rule (i.e., “No broker or dealer . . . shall”) and replacing it with an affirmative obligation (i.e., “A 

broker or dealer shall”).   

In addition, the Commission has removed language that paralleled the language in Rule 

15c6-1 regarding the scope of affected securities under the rule (“a contract for the purchase or 

sale of a security (other than an exempted security, a government security, a municipal security, 

commercial paper, bankers’ acceptances, or commercial bills)”).  The Commission has replaced 

the proposed language with a cross reference to the rule (e.g., “a securities transaction that is 

subject to the requirements of § 240.15c6-1(a)”).  The purpose of this change is to simplify the rule 

text and ensure that the scope of transactions relevant to compliance with Rule 15c6-2 remains 

consistent with the scope of transactions under Rule 15c6-1(a).  The scope of transactions remains 

unchanged from the proposed rule, as discussed in the T+1 Proposing Release, and is the same 

scope of transactions as those covered by Rule 15c6-1(a) for which the broker-dealer will engage 

in the allocation, confirmation, or affirmation process with another party.280 

                                                 
279  See infra Part III.C.2 (discussing the policies and procedures alternative in Rule 15c6-

2(a)(2)). 

280  See T+1 Proposing Release, supra note 2, at 10453.  



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Finally, as discussed further in Part III.C.2, the Commission is modifying proposed Rule 

15c6-2 to provide two options by which broker-dealers may comply with the rule, as adopted.  The 

two options are set forth in new paragraphs (a)(1) and (2).  The first option, reflected in paragraph 

(a)(1), is the proposed requirement for written agreements, modified in the ways discussed above.  

The second option, reflected in paragraph (a)(2), provides an alternative to the written agreements 

requirement, where, in lieu of a written agreement, a broker-dealer may choose to establish, 

maintain, and enforce written policies and procedures reasonably designed to ensure the 

completion of the allocation, confirmation, affirmation, or any combination thereof, for the 

transaction as soon as technologically practicable and no later than the end of the day on trade date 

in such form as necessary to achieve settlement of the transaction. 

While the Commission believes that a policies and procedures approach can relieve the 

parties to an institutional transaction from the burden of negotiating a written agreement where one 

does not exist, the Commission believes that the written agreement requirement may be useful to 

those broker-dealers that have already established written agreements that govern the operational 

arrangements for certain commercial relationships.  Specifically, such broker-dealers that already 

have written agreements in place to manage their commercial relationships with their customers’ 

advisers, custodians or other agents may find it efficient to revise these written agreements to 

comply with Rule 15c6-2.  Even where written agreements do not currently exist, if the relevant 

parties are amenable to entering into a written agreement to manage their responsibilities under the 

allocation, confirmation, and affirmation process, a broker-dealer may find that such agreement is 

an effective tool for identifying the circumstances and operational arrangements that the relevant 

parties ought to negotiate and agree to ensure the same-day allocation, confirmation and 

affirmation of the transaction, in a similar way that developing policies and procedures would also 



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identify and describe the circumstances and operational arrangements for each relevant 

relationship that would be necessary to ensure the completion of allocations, confirmations and 

affirmations.   

Ultimately, the written agreement requirement is designed to achieve the same goals as the 

alternative policies and procedures requirement, and broker-dealers may elect to comply with the 

alternative that they believe is better suited to their existing operations, specific business model, 

customer base, securities offered for settlement, and commercial relationships.  In some cases, 

because written agreements would be individually tailored to a specific commercial relationship, 

they may help broker-dealers and the other relevant parties to an institutional transaction develop 

innovations that improve the allocation, confirmation, and affirmation process.  Nonetheless, as 

previously discussed, the Commission acknowledges that the costs and challenges of negotiating a 

written agreement with the relevant parties may lead broker-dealers to choose to implement the 

rule via the policies and procedures requirement. 

In addition, the Commission believes that replacing the term “customer” with “other 

relevant parties” and to add an option to establish, maintain, and enforce written policies and 

procedures reasonably designed to ensure the completion of allocations, confirmations, and 

affirmations addresses the comments regarding use of third parties discussed in Part III.B.4.281  

First, the modifications ensure that the requirements apply not to the broker-dealer and its 

customer but instead to the broker-dealer and the relevant parties that ensure the completion of the 

allocation, confirmation, and affirmation process.  Such parties may be the customer, the 

                                                 
281  Such policies and procedures would be required to include the elements described in Part 

III.C.3 below.   



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customer’s investment adviser, the customer’s custodian, or another agent acting directly or 

indirectly on behalf of the customer.282  Second, where the adviser is the relevant party with whom 

the broker-dealer will engage to complete the allocation, confirmation, or affirmation process, then 

the broker-dealer may seek either to establish a written agreement to ensure compliance with the 

rule, or the broker-dealer may instead choose to establish, maintain, and enforce policies and 

procedures under the rule.  In the latter case, the broker-dealer may still seek to establish 

arrangements with the relevant parties to achieve compliance with the rule.283  

2. New Policies and Procedures Alternative to Written Agreements 

Requirement 

As previously discussed, the Commission is modifying proposed Rule 15c6-2 to enable a 

broker-dealer either to (1) enter into written agreements or (2) establish, maintain, and enforce 

reasonably designed written policies and procedures to ensure completion of the allocation, 

confirmation, affirmation, or any combination thereof, for a transaction as soon as technologically 

practicable and no later than the end of the day on trade date, in such form as necessary to achieve 

settlement.  The Commission is providing broker-dealers with this discretion under the rule to 

allow broker-dealers to select the approach that best aligns with their existing business practices 

                                                 
282  See supra notes 205–206 and accompanying text (describing the same). 

283  For example, consistent with the requirements of Rules 15c6-2(b)(3) and (4), as discussed 

further in Part III.C.3, policies and procedures would be required to, under paragraph (b)(3) 

describe the procedures that the broker or dealer will follow to ensure the prompt communication 

of trade information, investigate any discrepancies in trade information, and adjust trade 

information to help ensure that the allocation, confirmation, and affirmation can be completed by 

the target time frames on trade date, and, under paragraph (b)(4), describe how the broker or dealer 

plans to identify and address delays if another party (such as an investment adviser or a custodian) 

is not promptly completing the allocation or affirmation for the transaction, or if the broker or 

dealer experiences delays in promptly completing the confirmation.  It may be useful for broker-

dealers to engage with the relevant parties to the allocation, confirmation, and affirmation process 

regarding the nature of these communications. 



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and customer relationships, and to consider the approach that best enables the broker-dealer to 

ensure the completion of allocations, confirmations, and affirmations as soon as technologically 

practicable and no later than the end of the trade date.   

In response to the concerns raised by commenters in Part III.B.5, the Commission generally 

agrees that requiring policies and procedures as an alternative approach to compliance, separate 

from entering into written agreements, provides broker-dealers with more flexibility to achieve 

same-day affirmation.  As a general matter, the Commission believes that the policies and 

procedures alternative in Rule 15c6-2 can help ensure that, when the parties to a transaction 

encounter obstacles that may prevent them from completing an allocation, confirmation, or 

affirmation on trade date, they have policies and procedures to navigate, address, and when 

possible mitigate or overcome such obstacles.284  The Commission also acknowledges that, in 

cases where written agreements do not already exist, a requirement to enter into such agreements 

specifically to achieve same-day affirmations may create substantial burdens and challenges.  Such 

challenges may include, for example, a client who chooses not to authorize its investment adviser 

to enter into such agreement or circumstances where multiple third parties are relied upon to 

complete elements of the allocation, confirmation, and affirmation process.  Similarly, in the 

context of RVP/DVP transactions discussed in Part III.B.5, while some broker-dealers that 

regularly engage in RVP/DVP transactions may choose to enter into commercial agreements with 

their counterparties or agents of their counterparties to help facilitate this process, not all do and 

                                                 
284  For example, reasonably designed policies and procedures generally could include robust 

compliance and monitoring systems; processes to escalate identified instances of noncompliance 

for remediation; procedures that designate responsibility to business line personnel for supervision 

of functions and persons; processes for escalating issues; processes for periodic review and testing 

of the adequacy and effectiveness of policies and procedures; and training on policies and 

procedures.  The Commission discusses the specific elements required of reasonably designed 

written policies and procedures under Rule 15c6-2(b) in Part III.C.3. 



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may instead rely on a combination of best practices, relationship management, and the obligations 

imposed by Commission or SRO rules as a substitute for a formal written agreement among the 

parties necessary to ensure the allocation, confirmation, and affirmation of the transaction.  For 

those broker-dealers who do choose to enter into such agreements, the requirement for written 

agreements can be an effective and efficient mechanism for advancing the same-day affirmation 

requirement because it enables them to leverage their existing operational arrangements already 

established under the written agreements to codify the steps that the parties will take to ensure the 

same-day affirmation of transactions executed pursuant to the agreement.  Nonetheless, the 

Commission also believes that an alternative policies and procedures requirement will help relieve 

broker-dealers of the burdens and challenges that, in some cases, may arise if broker-dealers are 

required to enter into new written agreements specifically for the purpose of facilitating same-day 

affirmation.285  The Commission recognizes that, in response to this modification, and due to the 

costs and challenges of entering into written agreements identified by commenters generally, 

nearly all broker-dealers that do not already have written agreements may choose to implement the 

rule through the policies and procedures requirement rather than the written agreement 

requirement.286 

Regardless of the alternative chosen, the Commission recognizes that same-day affirmation 

still may not be achievable in all circumstances due to particular obstacles associated with the 

transaction, including the time of the transaction, the time zone in which a party to the transaction 

                                                 
285  See supra Part III.B.1 and infra Part III.B.7.  

286  For purposes of estimating the Paperwork Reduction Act (“PRA”) burdens under Rule 

15c6-2, the Commission has assumed that all respondent broker-dealers will implement the rule 

through the policies and procedures requirement.  See infra Part IX.C. 



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resides, and/or variations in local holidays.287  The difficulty associated with achieving a same-day 

affirmation will necessarily vary depending on the types of transactions entered, the locations of 

the parties, and the sophistication of their operational arrangements.  The Commission also 

generally agrees with commenters that requiring policies and procedures as an alternative approach 

to compliance, separate from entering into written agreements, provides broker-dealers with more 

flexibility to achieve same-day affirmation while also avoiding the substantial burdens and 

challenges that, in some cases, may result from having to enter into written agreements specifically 

to address the same-day affirmation objective.   

Whatever approach the broker-dealer determines is most appropriate for its circumstances 

and set of relationships, the Commission believes that either written agreements or policies and 

procedures can be structured to address challenges associated with the timing considerations raised 

by the commenters.  Where commercial relationships exist, for example, the parties retain the 

ability to specify in their written agreements what steps are appropriate to ensure that allocations, 

confirmations, and affirmations can be completed on trade date.  They can choose to specify how 

to accelerate the process to accommodate end of day trading, as well as how to staff their 

operations to ensure that the parties are available to complete allocations, confirmations, and 

affirmations across multiple time zones and, when needed, to plan for and accommodate local 

holidays.  In some cases, depending on the business model and scope of relationships that a 

broker-dealer employs to complete allocations, confirmations, and affirmations, establishing, 

maintaining, and enforcing written policies and procedures may be a more effective tool for 

navigating the challenges that may occur for some end-of-day transactions and transactions across 

multiple jurisdictions.  For example, to be reasonably designed, policies and procedures generally 

                                                 
287  See supra Part III.B.6 (discussing comments expressing concerns about these obstacles). 



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should address the steps that would be taken in response to known obstacles to same-day 

affirmation, such as when transactions are entered at the end of the trading day, transactions where 

one or both parties operate in other jurisdictions, and circumstances where local holidays or 

different time zones may limit the ability of the parties to communicate.  Where the parties cannot 

reach agreement on these matters in their written agreements, reasonably designed policies and 

procedures generally should establish the steps that a broker-dealer would take to accommodate 

multiple time zones and local holidays, and how the broker-dealer would plan to accelerate its 

processes to ensure the completion of allocations, confirmations, and affirmations for transactions 

entered near the end of day.  Written agreements and reasonably designed policies and procedures 

could also clearly define, for example, circumstances to avoid, or acceleration procedures to 

follow, when a same-day affirmation may otherwise be difficult to achieve because of potential 

timing constraints.   

For broker-dealers that maintain written agreements, such written agreements often 

establish thresholds or expectations regarding the completion of certain operational processes, and 

such agreements could incorporate thresholds or expectations with respect to end-of-day trading, 

time zones, and local holidays.  When time pressures are especially difficult, the parties could 

negotiate acceleration procedures to complete allocations, confirmations, and affirmations on trade 

date.  When this is not possible, a broker-dealer’s policies and procedures generally should 

establish target time frames on trade date for completing allocations, confirmations, and 

affirmations and describe how the broker-dealer plans to identify and address delays.  The 

Commission is also including in the final rule a requirement that policies and procedures specify 

the procedures the broker-dealer will follow to ensure the prompt communication of trade 

information, investigate any discrepancies in trade information, and adjust trade information to 



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help ensure completion of the allocation, confirmation, and affirmation by the target time frames 

on trade date. 

In this regard, the Commission does not believe the rule, as modified, incentivizes the 

parties to cancel trades because a broker-dealer would not be in violation of Rule 15c6-2 by failing 

to achieve the allocation, confirmation, or affirmation on trade date for a single trade unless it had 

failed to either enter into written agreements or establish, maintain, and enforce reasonably 

designed policies and procedures consistent with the rule.  With respect to policies and procedures 

under Rule 15c6-2, the Commission believes that maintaining and enforcing such policies and 

procedures means that a broker-dealer generally should ensure that it has designed its own systems 

and operations, and deployed sufficient resources to address, any potential systemic failures within 

its own process.288 

In addition, while the Commission specifies in Part III.C.3 several elements that such 

policies and procedures must include to be reasonably designed under Rule 15c6-2 (e.g., 

identification and description of technology systems, operations, and processes that the broker-

dealer uses to coordinate with other relevant parties to ensure completion of the allocation, 

confirmation, or affirmation process for the transaction), the Commission has not included in the 

rule similar elements to be required of written agreements, allowing a broker-dealer flexibility to 

negotiate and draft written agreements with the other parties and, potentially, to explore innovative 

methods for ensuring the allocation, confirmation, and affirmation of the transaction where unique 

operational arrangements specific to a given commercial relationship may enable new or specific 

approaches.  Because written agreements are subject to negotiation with the other relevant parties, 

                                                 
288  See supra note 284 (also discussing several processes that policies and procedures 

generally could include to promote the objectives of the Rule 15c6-2). 



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they are likely to consider a range of commercial interests that derive from the relationship 

between the parties.   

The Commission is not requiring investment advisers to adopt similar policies and 

procedures because investment advisers will not always be among the relevant parties completing 

the allocation, confirmation, and affirmation.  An adviser that enters into a Rule 15c6-2 agreement 

with a broker-dealer, or transacts with a broker-dealer that has policies and procedures reasonably 

designed to ensure timely completion of the allocation, confirmation, affirmation processes 

pursuant to the requirements of Rule 15c6-2, may, as a best practice, wish to evaluate whether its 

policies and procedures are sufficient to ensure compliance with such agreement or other 

obligations requested by the broker-dealer.  

3. Elements of Reasonably Designed Policies and Procedures 

The Commission believes that a policies and procedures approach can be an effective tool 

for ensuring the completion of allocations, confirmations, and affirmations so long as they consider 

holistically the broker-dealer’s available set of tools, responsibilities to the relevant parties, ability 

to communicate and resolve issues among the parties for a given transaction, and provide a 

mechanism for tracking progress over time.  With these objectives in mind, and to ensure policies 

and procedures are effective at achieving the stated objective, the Commission is adding new 

paragraph (b) to Rule 15c6-2 to specify the elements that such policies and procedures should 

include, as discussed further below. 

First, the Commission is requiring under paragraph (b)(1) that policies and procedures be 

reasonably designed to identify and describe any technology systems, operations, and processes 

that the broker-dealer uses to coordinate with other relevant parties, including investment advisers 

and custodians, to ensure completion of the allocation, confirmation, or affirmation process for the 

transaction.  The purpose of this provision is to ensure that the broker-dealer considers holistically 



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the range of systems and tools it has available to facilitate the same-day affirmation objective, as 

well as the range of operations and processes that a broker-dealer uses to facilitate same-day 

affirmations across different customer and commercial relationships.  In this way, such policies 

and procedures can establish whether and when different processes are necessary to facilitate 

same-day affirmations because certain transactions or customer types require different 

arrangements.  For example, a broker-dealer may have a specific policy or operational arrangement 

that addresses allocations, confirmations, and affirmations for a customer whose securities are held 

by a prime broker versus a customer whose securities are held by a bank custodian.  A broker-

dealer generally should also seek written assurances from advisers or custodians to help ensure that 

they understand and internalize their respective roles in facilitating completion of the allocation, 

confirmation, and affirmation process.289  Similarly, the broker-dealer may require different 

arrangements for a customer who engages directly with the broker-dealer versus a customer whose 

investment adviser or custodian engages with the broker-dealer on its behalf.  The broker-dealer 

may also require different systems, operations, or processes to manage customer relationships 

where the other relevant parties to the transaction operate in other time zones or jurisdictions.  

Consistent with paragraph (b)(1), reasonably designed policies and procedures are required to 

                                                 
289  As stated in Part III.C.2, the Commission is not requiring investment advisers to adopt 

policies and procedures similar to those in Rule 15c6-2(b) because investment advisers will not 

always be among the relevant parties completing the allocation, confirmation, and affirmation.  

However, an adviser that transacts with a broker-dealer that has policies and procedures pursuant 

to Rule 15c6-2 may wish to evaluate whether its own policies and procedures are sufficient to 

ensure compliance with obligations requested by the broker-dealer.  Where an adviser transacts 

with such a broker-dealer, the broker-dealer’s policies and procedures may provide that it 

generally should seek written assurances from the adviser that its policies and procedures are 

sufficient to ensure compliance with obligations requested by the broker-dealer.  Similarly, where 

a custodian participates in the allocation, confirmation, or affirmation process with such a broker-

dealer, the broker-dealer’s policies and procedures may provide that it generally should seek 

written assurances that the custodian would comply with obligations requested by the broker-

dealer. 



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identify and describe any technology systems, operations, and processes that the broker or dealer 

uses to coordinate with other relevant parties (such as investment advisers and custodians) to 

ensure completion of the allocation, confirmation, or affirmation process for the transaction.  To be 

reasonably designed, such policies and procedures would need to categorize and assess the range 

of operational arrangements and processes that would be used to facilitate the allocation, 

confirmation, and affirmation process across the full range of different customer and transaction 

types for which it offers services. 

Second, the Commission is requiring under paragraph (b)(2) that policies and procedures 

be reasonably designed to set target time frames on trade date for completing the allocation, 

confirmation, and affirmation for the transaction.  As discussed above, the Commission remains 

mindful that a broker-dealer may not be able to complete the allocation, confirmation, and 

affirmation process on the trade date with respect to every transaction it executes for every 

customer in every circumstance.  Thus, Rule 15c6-2 requires policies and procedures that set target 

time frames on trade date for completing the allocation, confirmation, and affirmation for 

transactions.  The broker-dealer must also enforce its policies and procedures, including those 

related to target time frames, for the range of transaction and customer types it serves, as well as 

the range of systems and operational processes it might employ.  For example, for highly 

automated transactions with high volume customers with direct control over their securities located 

in the same time zone, reasonably designed policies and procedures would set target time frames 

for completing the allocation, confirmation, and affirmation of the transaction very close in time to 

trade execution (i.e., as soon as technologically practicable).  For transactions that are more 

complex, such as those where a customer or its agent operates in other time zones or jurisdictions, 

or a separate custodian maintains securities or cash accounts on the customer’s behalf, a broker-



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dealer may consider how to structure the time frames to accommodate the level of effort that will 

be necessary to complete the allocation, confirmation, and affirmation.  Pursuant to Rule 15c6-

2(b)(1), reasonably designed policies and procedures would be able to categorize the range of 

transactions and customer relationships that it has established and estimate the length of time it 

takes to complete each of the allocation, confirmation, and affirmation to set its target time frames.  

As discussed in Part III.B.1, a broker-dealer is required to enforce its policies and procedures, 

meaning that it is obligated to design its systems and commit the necessary resources to ensure that 

it can comply with its own policies and procedures under the rule. 

Third, the Commission is requiring under paragraph (b)(3) of Rule 15c6-2 that policies and 

procedures be reasonably designed to describe the procedures that the broker-dealer will follow to 

ensure the prompt communication of trade information, investigate any discrepancies in trade 

information, and adjust trade information to help ensure that the allocation, confirmation, and 

affirmation can be completed by the target time frames on trade date.  Although target time frames 

will not always be met, and although affirmations will not always be complete on trade date, a 

broker-dealer is required to enforce its policies and procedures under Rule 15c6-2, and so 

reasonably designed policies and procedures would need to ensure that an action fully within the 

broker-dealer’s own control is not preventing the completion of the allocation, confirmation, or 

affirmation for the transaction.  Thus, paragraph (b)(3) of the rule requires that policies and 

procedures lay out the ex ante steps that the broker-dealer will take to promptly communicate trade 

information, as well as to investigate discrepancies and adjust trade information in response to 

information the broker-dealer receives.   

Fourth, the Commission is requiring under paragraph (b)(4) of Rule 15c6-2 that policies 

and procedures be reasonably designed to describe how the broker-dealer plans to identify and 



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address delays if another party, including an investment adviser or a custodian, is not promptly 

completing the allocation or affirmation for the transaction, or if the broker-dealer experiences 

delays in promptly completing the confirmation.  As with paragraph (b)(3) of the rule, the purpose 

of paragraph (b)(4) is to ensure, to the greatest extent possible, that the broker-dealer is not the 

source of delay in completing the allocation, confirmation, and affirmation process.  As such, 

pursuant to paragraph (b)(4), the broker-dealer should establish ex ante the steps that it would take 

in attempting to obtain an allocation or affirmation from its customer or the other relevant parties 

to the transaction (such as investment advisers or custodians).  In the Commission’s view, broker-

dealers generally should take reasonable steps to escalate issues with their customers, or the other 

relevant parties acting on their customers’ behalf, to resolve issues and meet the target time frames 

set forth in the broker-dealer’s policies and procedures.  In addition, the broker-dealer’s policies 

and procedures generally should identify the circumstances under which a broker-dealer may 

experience delays in promptly completing the confirmation and what steps it would take to resolve 

the delay.  In addition, because a broker-dealer is required to enforce its policies and procedures, 

the Commission believes that it should consider having policies and procedures that explain what 

efforts it would take to resolve recurring problems, particularly if they recur with respect to one 

particular counterparty, customer, or custodian that, for example, routinely fails to meet the broker-

dealer’s targets. 

Finally, the Commission is requiring under paragraph (b)(5) of Rule 15c6-2 that policies 

and procedures be reasonably designed to measure, monitor, and document the rates of allocations, 

confirmations, and affirmations completed within the target time frames established under 

paragraph (b)(2) of the rule, as well as the rates of allocations, confirmations, and affirmations 

completed as soon as technologically practicable and no later than the end of trade date.  The 



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purpose of this requirement is to ensure that each broker-dealer is taking steps to identify when 

allocations, confirmations, and affirmations are completed, whether those completed actions 

occurred within the target time frames established pursuant to paragraph (b)(2), and if not, whether 

those allocations, confirmations, and affirmations were completed on trade date.  In designing its 

policies and procedures, a broker-dealer generally should consider defining what operational 

processes and time frames would enable a transaction to be completed as soon as technologically 

practicable, so that a broker-dealer can assess the rate of transactions that are allocated, confirmed, 

and affirmed as soon as technologically practicable on trade date.  While Rule 15c6-2 does not 

require that same-day affirmation occur for every transaction that a broker-dealer executes and 

settles, for policies and procedures to be effective, the broker-dealer generally should have a sense 

for how well its policies and procedures ensure the completion of the allocation, confirmation, and 

affirmation process as soon as technologically practicable and no later than the end of trade date.  

Metrics developed in response to paragraph (b)(5) generally should be used by the broker-dealer to 

identify and assess the circumstances under which allocations, confirmations, and affirmations are 

less likely to be achieved as soon as technologically practicable and no later than the end of trade 

date so that policies and procedures are updated and revised over time with improvements.  This 

would help ensure that the broker-dealer is effectively maintaining and enforcing its policies and 

procedures, as required by the rule. 

4. Use of Defined Terms Other than “Customer” 

The Commission has previously discussed modifications to Rule 15c6-1(a) to address 

concerns about use of the term “customer” in the rule.  After considering the comments regarding 

definitions of other terms discussed in Part III.B.3, the Commission continues to believe that the 

terms “allocation,” “confirmation,” “affirmation,” and “end of the day on trade date,” are widely 



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used by the industry and are sufficiently understood to facilitate compliance with the rule.290  The 

T+1 Proposing Release explained the commonly understood meanings of these terms.291  

Importantly, the specific application of these concepts may vary in different operational 

arrangements, and ultimately the parties to a transaction must all share a common understanding of 

their meaning to effectively complete the allocation, confirmation, or affirmation process and the 

settlement of the transaction.  Therefore, the Commission is not revising Rule 15c6-2 to define the 

terms “allocation,” “confirmation,” “affirmation,” “end of the day on trade date,” or “trade” for 

purposes of the rule. 

When a broker-dealer will use written agreements under Rule 15c6-2(a)(1), the 

Commission believes that the parties generally should retain discretion to negotiate terms and 

expectations that are consistent with their specific operational arrangements and processes, and 

such negotiations will be most effective without defining terms that, when they do vary in their 

meaning, do so because they have been defined in the context of the operational arrangements 

established to facilitate the affirmation and settlement of the trade.  When a broker-dealer 

determines to establish, maintain, and enforce policies and procedures consistent with Rule 15c6-

2(a)(2), the broker-dealer may choose to define these terms, and any other terms relevant to the 

same-day affirmation objective, either in coordination with the relevant parties to the written 

agreement or in its policies and procedures, to help ensure that all the relevant parties have a 

shared understanding of these generally understood terms. 

5. No Requirement to Link Settlement Instructions to Affirmations 

                                                 
290  See T+1 Proposing Release, supra note 2, at 10453–54.  

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Regarding the comment discussed in Part III.B.2, the Commission is declining to modify 

Rule 15c6-2 to require that the sending of settlement instructions be linked to completion of the 

affirmation.  As first discussed in the T+1 Proposing Release, the Commission believes that same-

day affirmation reduces the likelihood of exceptions or other processing errors that can prevent a 

transaction from achieving timely settlement.292  While completing the affirmation on trade date is 

an indicator that a trade is ready for settlement, it does not necessarily mean that the trade can or 

will settle on a timely basis.  For example, the relevant parties to the transaction may still need to 

take additional steps to facilitate settlement, such as ensuring that securities and funds are available 

in the relevant accounts, after the affirmation has been received.  Accordingly, the Commission 

believes that it may not be appropriate in every circumstance to link the sending of settlement 

instructions with the receipt of an affirmation because this would not necessarily accommodate 

taking of these additional steps necessary to ensure timely settlement.  Nonetheless, the 

Commission has a strong interest in advancing the objective of straight-through processing,293 and 

one effect of increasing the adoption of straight-through processing techniques over time may be 

that, for certain transactions, the parties may determine to link the sending of settlement 

instructions with the submission of a completed affirmation to facilitate the efficient and timely 

settlement of the transaction without unnecessary manual intervention.294 

                                                 
292  See T+1 Proposing Release, supra note 2, at 10454.  

293  See infra Part V (discussing the importance of advancing the objective of straight-through 

processing and adopting new Rule 17Ad-27).  

294  See infra Part V.C.1  (discussing the relationship between policies and procedures for 

straight-through processing at CMSPs and the use of manual processes to complete the settlement 

of securities transactions). 



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In addition, the Commission understands that the customer or the customer’s custodian 

generally retains discretion to determine under what circumstances it is appropriate to link the 

transmission of settlement instructions to the receipt of an affirmation.  The Commission is 

mindful that Rule 15c6-2 only applies to broker-dealers, and, as such, the Commission believes 

that the linking of settlement instructions with the completion of the affirmation would likely 

require the cooperation of the custodian in many cases.  For this reason, the Commission is not 

modifying the rule to include a requirement for linking the transmission of settlement instructions 

to the receipt of an affirmation.  Nonetheless, a broker-dealer could, either in its written 

agreements or in its policies and procedures, set parameters for engaging with its customer or its 

customer’s custodian for the linking of settlement instructions to the completion of the affirmation. 

IV. Advisers Act Rule 204-2 – Investment Adviser Recordkeeping 

A. Proposed Amendments to Rule 204-2 

Under the Commission’s proposed Rule 15c6-2, for contracts where parties agreed to 

engage in an allocation, confirmation, or affirmation process, a broker-dealer would have been 

prohibited from effecting or entering into a contract for the purchase or sale of certain securities on 

behalf of a customer unless it entered into a written agreement with the customer that required the 

allocation, confirmation, affirmation, or any combination thereof to be completed as soon as 

technologically practicable and no later than the end of the day on trade date in such form as may 

be necessary to achieve settlement in compliance with proposed Rule 15c6-1(a).  To the extent that 

investment advisers were party to these agreements, the Commission would have required the 

adviser to retain related records.295  Specifically, the Commission proposed to amend Rule 204-2 

                                                 
295  See T+1 Proposing Release, supra note 2, at 10456 (discussing proposed Rule 204-

2(a)(7)(iii)).    



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under the Advisers Act by adding a requirement that if the adviser is a party to a contract under 

proposed Rule 15c6-2, it must make and keep records of each confirmation received, and any 

allocation and each affirmation sent, with a date and time stamp for each allocation (if applicable) 

and affirmation that indicates when the allocation or affirmation was sent to the broker or dealer.296  

B. Comments 

While commenters generally did not oppose the recordkeeping requirement regarding 

confirmations, allocations, and affirmations, a number of commenters suggested certain 

modifications or clarifications. One commenter opposed proposed Rule 15c6-2’s contract 

requirement but nonetheless supported the recordkeeping of allocations, confirmations, and 

affirmations, stating that “such recordkeeping, coupled with the amendments to the settlement 

cycle rule, should suffice to achieve the Commission’s policy objectives without imposing 

additional burdensome documentation requirements.”297 Another commenter sought clarification 

regarding an adviser’s ability to rely on third parties to meet its recordkeeping obligations for 

allocations, confirmations, and affirmations.298 One commenter objected to the proposed 

amendments to Rule 204-2 on the grounds that neither they, nor proposed Rule 15c6-2, were 

necessary for the transition from to T+2 to T+1 and should not be adopted.299  

                                                 
296  Id.     

297  ICI Letter, supra note 16, at 5 n.15. 

298  See IAA April Letter, supra note 16, at 5–6. 

299  See Fidelity Letter, supra note 16, at 5. 



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C. Final Rule and Discussion 

The Commission is amending the investment adviser recordkeeping rule to require 

registered investment advisers to make and keep records of confirmations they receive and of 

allocations and affirmations they send or receive for any transaction that is subject to the 

requirements of Rule 15c6-2(a).300  Specifically, the Commission is amending Rule 204-2(a)(7)(iii) 

under the Advisers Act to require investment advisers registered or required to be registered under 

section 203 of the Advisers Act to make and keep true, accurate and current certain records with 

respect to any transaction that is subject to the requirements of Rule 15c6-2(a), specifically those 

transactions where a broker-dealer engages in the allocation, confirmation, or affirmation process 

with another party or parties to achieve settlement of a securities transaction that is subject to the 

requirements of § 240.15c6-1(a). The required records include each confirmation received, and any 

allocation and each affirmation sent or received, with a date and time stamp for each allocation and 

affirmation that indicates when the allocation and affirmation was sent or received. As with other 

records required under Rule 204-2(a)(7), advisers will be required to keep originals of written 

confirmations received, and copies of all allocations and affirmations sent or received, but may 

maintain records electronically if they satisfy certain conditions.301 The final amendments to Rule 

204-2 largely reflect, with certain modifications, the approach in the Proposal. 

Requiring the retention of these records is important for the Commission staff’s use in its 

regulatory and examination program and will be helpful to monitor the transition from T+2 to T+1. 

                                                 
300  See Rule 204-2(a)(7)(iii).     

301  See Rule 204-2(a)(7) (requiring making and keeping originals of all written 

communications received and copies of all written communications sent by an investment adviser 

relating to the records listed thereunder); but see Rule 204-2(g) (permitting advisers to maintain 

records electronically if they establish and maintain required procedures). 



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The Commission disagrees with a commenter that argued the proposed amendments to Rule 204-2 

and proposed Rule 15c6-2 are not necessary for the transition from to T+2 to T+1. The 

Commission believes that the timing of communicating allocations to the broker or dealer is a 

critical pre-requisite to help ensure that confirmations can be issued in a timely manner, and 

affirmation is the final step necessary for an adviser to acknowledge agreement on the terms of the 

trade or alert the broker or dealer of a discrepancy. The Commission believes the recordkeeping 

requirements for investment advisers should help establish that obligations of the various parties 

involved in the settlement process related to achieving a matched trade have been met.  Moreover, 

the amendments to Rule 204-2 are intended to reduce risk following the transition to T+1 by 

improving affirmation rates. 

The final amendments to Rule 204-2 apply the new recordkeeping requirements to all 

registered advisers for any transaction that is subject to the requirements of Rule 15c6-2(a).  

Although the proposed recordkeeping requirements would have applied to any registered adviser 

that is a party to a contract under proposed Rule 15c6-2, final Rule 15c6-2 includes a second 

“policies and procedures” option for a broker-dealer engaging in a transaction subject to Rule 

15c6-1(a).  Despite this change, paragraph (a) of the final Rule 15c6-2 applies to the same subset 

of transactions to which proposed Rule 15c6-2 would have applied, and, accordingly, the final 

amendments are designed to keep the scope of the final recordkeeping requirements the same as 

proposed.302 The Commission believes that requiring registered advisers to make and keep records 

                                                 
302  Consistent with the T+1 Proposing Release, we estimate that certain investment advisers 

registered with the Commission will not be required to make and keep the required records 

because they do not have any institutional advisory clients and therefore will not facilitate 

transactions subject to Rule 15c6-2(a).  See T+1 Proposing Release, supra note 2, at nn.424-425 

and related text (estimating that certain advisers registered with the Commission would not be 



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of confirmations received, and allocations and affirmations sent or received with respect to these 

transactions supports the Commission’s policy objectives to ensure that the transaction process is 

completed and trades timely settle on T+1.  In addition, instead of requiring advisers to make and 

keep copies of allocations or affirmations sent and date and time stamps showing when they were 

sent to the broker or dealer, as proposed, the final rule will include allocations and affirmations 

that are sent or received and require date and time stamps showing when they were sent or 

received to clarify the rule text from the proposal.  Finally, instead of requiring “a date and time 

stamp for each allocation (if applicable)” (emphasis added), the Commission removed “if 

applicable” to clarify that a date and time stamp should be included for each allocation sent.  These 

changes are designed to cover circumstances where an adviser receives a copy of allocations or 

affirmations from a third party, such as a custodian or sub-adviser or other party involved in the 

transaction, and require a date and time stamp in each case.  

Based on staff experience as discussed in the T+1 Proposing Release, as well as the 

comments received, the Commission believes that majority of advisers that place the order for 

execution—or sub-advisers or other third parties acting on an adviser’s behalf—make and keep 

originals and/or electronic copies of allocations, confirmations, and affirmations sent or 

received.303  Advisers, which have varied trade allocation processes, often allocate trades through 

                                                 

required to make and keep the proposed required records because they do not have any 

institutional advisory clients and therefore would not enter into a contract under proposed Rule 

15c6-2). 

303  See T+1 Proposing Release, supra note 2, at 10457; see also IAA April Letter, supra note 

16, at 4–7; ICI Letter, supra note 16, at 5; ISITC Letter, supra note 29, at 2. 



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the use of internal systems, portfolio management systems and order management systems.304  

Some advisers, however, may not make and keep these records or may only retain them on paper.  

In many cases, affirmation is performed by the asset owner’s custodian (or its prime broker) on the 

asset owner’s behalf.305  In response to a comment received, the Commission is confirming that an 

adviser may rely on a third party to make and keep the required records, although using a third 

party to make and keep records does not reduce an adviser’s obligations under Rule 204-2.  As 

discussed above, in recognition of the role of third parties, the Commission is requiring advisers to 

keep records of allocations or affirmations sent or received, in the event that the adviser receives a 

copy of such records from a third party.   

As stated in the T+1 Proposing Release, based on staff experience, the Commission 

believes many records are already consistently date and time stamped to the nearest minute using 

either a local time zone or a centralized time zone, such as coordinated universal time, or 

“UTC.”306  The final amendments to Rule 204-2 require advisers to time and date stamp each 

allocation and affirmation.   

The three commenters that discussed the proposed time and date stamping requirement for 

allocations and affirmations did not oppose the proposed time and date stamping requirements, 

                                                 
304  See IAA April Letter, supra note 16, at 4. 

305  See DTCC ITP Forum Remarks, supra note 264 (stating that up to 70% of institutional 

trades are affirmed by custodians); IAA April Letter, supra note 16, at 4 (agreeing that 70% of 

adviser trades are affirmed by the custodian, consistent with information received from its 

members); see also ICI Letter, supra note 16, at 5; ISITC Letter, supra note 29, at 2. 

306  T+1 Proposing Release, supra note 2, at 10456–57. 



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although some sought clarification regarding how the requirement would be applied in practice.307 

One commenter observed that storing timestamps of processing events such as the generation or 

receipt of messages is a good practice that provides opportunities to analyze specific points of 

latency and contributes to an accurate audit trail.308 This commenter also stated that electronic 

communication protocols inevitably include storage of complete event history with timestamps. 

Another commenter, while stating that time stamps are employed today, interpreted our proposal to 

require a single, industry-approved time stamp format based on a common clock, indicating such 

an approach would be challenging.309 This commenter raised other questions, such as what is end 

of trade date in regard to time stamping, and suggested that timestamps for processes that occur 

post-midnight ET may incorrectly identify properly affirmed trades as non-compliant.310 Another 

commenter suggested that the T+1 Proposing Release significantly underestimated the system and 

process changes that will be required and that the proposed requirement for advisers to timestamp 

certain trading records would add further complexity and costs to managers’ efforts.311  

                                                 
307  See ISITC Letter, supra note 29, at 4–5; FIX Trading Letter, supra note 218, at 4; AIMA 

Letter, supra note 29, at 2.  

308  FIX Trading Letter, supra note 218, at 4. 

309  ISITC Letter, supra note 29, at 4–5.  

310  Id. at 4–5 (noting that such considerations include the agreement on the time stamp format, 

evidence of time stamps (for compliance or audit purposes), time differences due to multiple 

systems and participants resulting in time stamps that may not perfectly match, and new processes 

needed to govern resolution of time stamps that could delay trade processing when all pertinent 

trade details are otherwise correct and agreed). 

311  See AIMA Letter, supra note 29, at 2.  



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Although the Commission previously stated in the T+1 Proposing Release that the adviser 

generally should time and date stamp records of allocations and affirmations to the nearest 

minute,312 the Commission agrees with commenters that imposing more prescriptive requirements 

such as an agreed time stamp could result in additional challenges. The Commission is not 

adopting any such requirements for the time and date stamp format in Rule 204-2 or requiring that 

the format used be based on a common clock.  This approach is designed to provide flexibility to 

date and time stamp allocations and affirmations in accordance with existing processes and 

industry practices, while still providing information about when allocations or affirmations were 

sent or received. This approach also avoids the need for prescriptive guidance about what end of 

trade date means, requiring everyone to handle different time zones in the same way, and any 

related costs incurred to follow such guidance. 

Requiring these records, including a time and date stamp of all affirmations and allocations 

(but not confirmations), will aid the Commission staff in preparing for examinations of investment 

advisers and assessing adviser compliance with Rule 204-2 and ultimately help ensure that trades 

involving such advisers will timely settle on T+1. In addition, this requirement will help advisers 

research and remediate issues that may cause delays in the issuance of allocations and affirmations 

and improve their timeliness overall. Requiring these records also will help advisers establish that 

they have timely met contractual obligations, if applicable, or any requirements broker-dealers 

impose in light of their compliance obligations under final Rule 15c6-2.  

V. Exchange Act Rule 17Ad-27 - Requirement for CMSPs to Facilitate Straight-Through 

                                                 
312  See T+1 Adopting Release, supra note 2, at 10456. 



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Processing 

A. Proposed Rule 17Ad-27 

In the T+1 Proposing Release, the Commission proposed new Rule 17Ad-27 to establish 

new requirements for certain clearing agencies acting as CMSPs.313  The Commission proposed 

these requirements to improve the efficiency of institutional trade processing, and better position 

CMSPs to provide services that would not only reduce risk generally, but also help facilitate an 

orderly transition to a T+1 standard settlement cycle, as well as potential further shortening of the 

settlement cycle in the future.314  CMSPs have become increasingly critical to the functioning of 

the securities market over the past twenty years, due in part to the rising volume of securities 

transactions for which CMSPs provide matching and other services.315  A shortened settlement 

cycle may lead to expanded use of CMSPs, as well as an increased focus on enhancing the services 

and operations of the CMSPs themselves.316  While the introduction of new technologies and 

                                                 
313  See id. at 10457.  CMSPs are clearing agencies as defined in section 3(a)(23) of the 

Exchange Act, and as such, are required to register as a clearing agency or obtain an exemption 

from registration.  The Commission has currently exempted three CMSPs from the registration 

requirement.  The Commission also has adopted rules that apply to both registered and exempt 

clearing agencies, including CMSPs operating pursuant to an exemption from registration.  See, 

e.g., Regulation Systems Compliance and Integrity, Exchange Act Release No. 73639 (Nov. 19, 

2014), 79 FR 72252 (Dec. 5, 2014) (“Regulation SCI Adopting Release”). 

314  See T+1 Proposing Release, supra note 2, at 10458. 

315  See id.; see also Press Release, DTCC, Over 1,800 Firms Agree to Leverage U.S. 

Institutional Trade Matching Capabilities in DTCC’s CTM (Oct. 12, 2021), 

https://www.dtcc.com/news/2021/october/12/over-1800-firms-agree-to-leverage-dtccs-ctm; 

DTCC’s Trade Processing Suite Traffics One Billion Trades, Traders Magazine (Feb. 13, 2017), 

https://www.tradersmagazine.com/departments/clearing/dtccs-trade-processing-suite-traffics-one-

billion-trades/. 

316  See T+1 Proposing Release, supra note 2, at 10458. 

https://www.dtcc.com/news/2021/october/12/over-1800-firms-agree-to-leverage-dtccs-ctm
https://www.tradersmagazine.com/departments/clearing/dtccs-trade-processing-suite-traffics-one-billion-trades/
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streamlined operations such as those offered by CMSPs have improved the efficiency of post-trade 

processing over time, the Commission stated in the T+1 Proposing Release that more could be 

done to facilitate further improvements.317  Specifically, the Commission explained that 

eliminating the use of tools that encourage or require manual processing, alongside the continued 

development and implementation of more efficient automated systems in the institutional trade 

processing environment, is essential to reducing risk and costs to ensure the prompt and accurate 

clearance and settlement of securities transactions, particularly in a T+1 environment.318   

As proposed, Rule 17Ad-27 was comprised of two requirements.  First, the proposed rule 

would require a clearing agency that provides central matching services for transactions involving 

broker-dealers and their customers (i.e., CMSPs) to establish, implement, maintain and enforce 

policies and procedures to facilitate STP for transactions involving broker-dealers and their 

customers.319  Second, the proposed rule would require a CMSP to submit to the Commission 

every twelve months a report that describes (i) the CMSP’s current policies and procedures for 

facilitating straight-through processing; (ii) the CMSP’s progress in facilitating straight-through 

processing during the twelve month period covered by the report; and (iii) the steps the CMSP 

intends to take to facilitate and promote STP during the twelve month period following the period 

covered by the report.320   

                                                 
317  See id. at 10457.  

318  See id. at 10458. 

319  See id. at 10458–59.   

320  See id. at 10459–60. 



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Proposed Rule 17Ad-27 would require a CMSP to submit the annual report to the 

Commission using EDGAR, and to tag the information in the report using structured XBRL.321  

The Commission stated in the proposal that this annual report would be made publicly available on 

the Commission’s website to enable the public to review and analyze progress on achieving 

straight-through processing, identify potential improvements to further facilitate straight-through 

processing, and provide the Commission and the public with a centralized, publicly accessible 

electronic database for the reports, facilitating the use of the reported data on straight-through 

processing.322  The proposing release also discussed the Commission’s preliminary view as to its 

intended understanding of various aspects of the two main requirements under proposed Rule 

17Ad-27, including terms used in the rule text.323   

B. Comment Letters from DTCC ITP 

The Depository Trust & Clearing Corporation (“DTCC”), in conjunction with DTCC ITP 

LLC and DTCC ITP Matching (US) LLC, (collectively “DTCC ITP”) submitted two comment 

                                                 
321  See id. at 10459.  This requirement would be implemented by including a cross-reference 

to Regulation S-T in proposed Rule 17Ad-27, and by amending Regulation S-T to include the 

proposed straight-through processing reports.  Pursuant to 17 CFR 232.301 (“Rule 301 of 

Regulation S-T”), the EDGAR Filer Manual is incorporated by reference into the Commission’s 

rules.  In conjunction with the EDGAR Filer Manual, Regulation S-T governs the electronic 

submission of documents filed with the Commission. 

322  See id.   

323  For example, the commonly used term “straight-through processing” was explained in the 

T+1 Proposing Release as to generally refer to processes that allow for the automation of the entire 

trade process from trade execution through settlement without manual intervention.  Id. at 10458 

(citing to Securities Industry Association (SIA), T+1 Business Case Final Report (July 2000) 

(“SIA Business Case Report”), https://www.sifma.org/wp-content/uploads/2017/05/t1-business-

case-final-report.pdf).  

https://www.sifma.org/wp-content/uploads/2017/05/t1-business-case-final-report.pdf
https://www.sifma.org/wp-content/uploads/2017/05/t1-business-case-final-report.pdf


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letters discussing proposed Rule 17Ad-27,324 and these were the only comments received by the 

Commission that extensively discussed proposed Rule 17Ad-27.325  DTCC ITP Matching (US) 

LLC (“ITP Matching US”) operates one of three entities that to date have received from the 

Commission an exemption from registration as a clearing agency to operate as a CMSP.326  ITP 

Matching US currently offers two services to facilitate post-trade processing of institutional trades: 

                                                 
324  See DTCC ITP April Letter, supra note 216; letter from Matthew Stauffer, Managing 

Director and Head of DTCC Institutional Processing, DTCC (Sept. 30, 2022) (“DTCC ITP 

September Letter”).  DTCC ITP Matching (US) LLC is a wholly-owned subsidiary of DTCC ITP 

LLC, a Delaware limited liability company controlled by its sole member, DTCC.  DTCC is the 

parent company of The Depository Trust Company, the National Securities Clearing Corporation, 

and the Fixed Income Clearing Corporation, all registered with the Commission as clearing 

agencies under section 17A of the Exchange Act.  

325 In addition, the Commission received three comment letters from The Options Clearing 

Corporation (“OCC”), State Street, and the FIX Trading Community that referenced proposed 

Rule 17Ad-27.  Like DTCC ITP, OCC recommended including “reasonably designed” in the text 

of any rule requiring a “registrant” to maintain policies and procedures.  See OCC Letter, supra 

note 15, at 3.  State Street supported measures intended to enhance STP at CMSPs, including the 

annual publication of data on matching rates and other similar efficiency metrics.  See State Street 

Letter, supra note 15, at 4.  FIX supported efforts to retire manual mechanisms while ensuring that 

electronic bilateral and central matching mechanisms that support STP are permitted.  See FIX 

Trading Letter, supra note 227, at 4.  Given the brief and general nature of these comments, and 

the fact that they are aligned with comments also made by DTCC ITP, the Commission has 

focused its discussion for the remainder of Part V on the substantive points raised by DTCC ITP. 

326  See Order Granting Exemption from Registration as a Clearing Agency for Global Joint 

Venture Matching Services – U.S., LLC, Exchange Act Release No. 33188 (Apr. 17, 2001), 66 FR 

20494, (Apr. 23, 2001) (“GJVMS Exemption Order”); Order Approving Application for an 

Exemption from Registration as a Clearing Agency for Bloomberg STP LLC and SS&C Techs, 

Inc., Exchange Act Release No. 76514 (Nov. 24, 2015), 80 FR 75388, 75413 (Dec. 1, 2015) 

(“Bloomberg STP and SS&C Techs Exemption Order”).  DTCC ITP Matching US is formerly 

known as GJV Matching Service – US, LLC. 



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(i) TradeSuite ID, an electronic trade confirmation (“ETC”) service;327 and (ii) a central trade 

matching service (“CTM”) for securities transactions (in its capacity as a CMSP).328 

While DTCC ITP generally supported “the Commission’s approach to facilitating T+1 

through the promotion of same-day affirmation, STP and other enhancements in the processing of 

institutional trades at CMSPs as core building blocks to a successful transition to T+1,” DTCC ITP 

raised several concerns about specific aspects of the proposed rule and requested specific 

modifications to the proposed rule text.  DTCC ITP stated that these changes would provide 

additional flexibility and clarity, and better position CMSPs to achieve the stated goals of the 

proposed rule.329  Specifically, and as detailed below, DTCC ITP expressed in its comment letters 

the following concerns. 

                                                 
327  An ETC allows market participants, such as broker-dealers, investment managers, hedge 

funds, banks, custodians, and agents, to coordinate domestic post-trade activities, generally by 

providing trade counterparties with the ability to electronically confirm and affirm certain details 

of their trades.  This automated process eliminates manual and verbal communications in the 

confirmation and affirmation process, thereby reducing risks and facilitating shorter settlement 

timeframes.  For a description of ETCs generally, see GJVMS Exemption Order, supra note 326, 

at 20496. 

328  See DTCC ITP April Letter, supra note 216, at 2.  Generally, TradeSuite ID allows broker-

dealers, buy-side firms, custodians, and agents to confirm and affirm elements of their trades in 

equity and fixed income securities through an automated post-trade process.  CTM allows broker-

dealers and buy-side firms to electronically match block trades, allocations, and confirmations in 

trades involving a wide variety of asset classes and provides a trade allocation and acceptance 

service that communicates trade and allocation details between parties.  See id. at 2–3. 

329  For example, DTCC ITP supported the concept of requiring policies and procedures and 

submission of an annual report but suggested specific recommendations regarding what should be 

included in the annual report.  Further, it supported not “prescribing” the meaning of key terms and 

concepts used in the rule text, such as “allocation,” “confirmation,” “affirmation,” and “customer,” 

or stipulating separate requirements and deadlines for each of these processing functions or 

specifying separate requirements and deadlines for each processing step.  See id. at 3–4. 



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1. Amend Policies and Procedures Requirement to Add “Reasonably 

Designed” To the Current Text 

In its initial comment letter, DTCC ITP suggested that the requirement in proposed Rule 

17Ad-27 for a CMSP to establish, implement, maintain, and enforce policies and procedures 

should be amended so that a CMSP’s policies and procedures are “reasonably designed” to 

facilitate STP.330  The commenter provided a number of reasons to support the amendment.331  

First, in the commenter’s view, the proposed rule is an inflexible standard that places “all 

responsibility” for facilitating STP on the CMSPs, and as such, is inconsistent with the 

Commission’s view of STP generally, and with regard to CMSPs specifically, will undermine the 

stated goal of facilitating STP.332  Further, DTCC ITP expects that the proposed text would result 

                                                 
330  See id. at 4.  The Commission described STP in the T+1 Proposing Release as generally 

referring to the processes that allows for automation of the entire trade process from trade 

execution through settlement without manual intervention.  See T+1 Proposing Release, supra note 

2, at 10458.  In the context of institutional trade processing, STP occurs when a market participant 

or its agent uses the facilities of a CMSP to enter trade details and completes the trade allocation, 

confirmation, affirmation, and/or matching processes without manual intervention.  See DTCC ITP 

April Letter, supra note 216, at 5. 

331  As discussed further in Part V.C.1 below, the Commission concurs with DTCC ITP’s 

general suggestion that amending the policies and procedures requirement to add “reasonably 

designed” is appropriate, but for reasons other than those cited by DTCC ITP in its comment letter.  

See DTCC ITP April Letter, supra note 216, at 4.   

332  See id. at 5.  Because the obligation to develop policies and procedures to facilitate STP, as 

described in proposed Rule 17Ad-27 applies to CMSPs only, the scope of the policies and 

procedures would only include those activities that are within the control of the CMSP, which in 

turn would bind only those entities that are in contractual privity with the CMSP.  Moreover, the 

Commission proposed a number of other rules that required other market participants, namely 

broker-dealers and investment advisers, to comply with specified rules addressing same-day 

affirmation that the Commission anticipates will not only facilitate T+1 but encourage the 

development of more efficient and automated operations, which will in turn further STP.  See 

supra Parts III.A and IV.A concerning proposed Rule 15c6-2 and amended Rule 204-2, 

respectively.  Accordingly, the Commission does not believe that the policies and procedures 

requirement under the proposed rule imposes an inflexible standard that places “all responsibility” 



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in CMSPs avoiding innovation of new technologies that promote STP because of liability 

concerns.333  In contrast, DTCC ITP stated, amending the rule text to reflect a “reasonably 

designed standard” would make the rule consistent with the Commission’s stated policy goals. 

Second, DTCC ITP stated that the “standard” in proposed Rule 17Ad-27 is inconsistent 

with the approach the Commission has applied to CMSPs in the orders exempting matching 

services from registration as a clearing agency because the approach in the exemptive orders is 

more flexible than that of the proposed rule.334  For example, the commenter stated that the 

                                                 

for facilitating STP on the CMSPs or is inconsistent with the Commission’s view of STP generally 

or its stated policy goals.   

333  See DTCC ITP April Letter, supra note 216, at 6. 

334  See id.  The Commission does not agree with DTCC that the “standard” in proposed Rule 

17Ad-27 applicable to the policies and procedures requirement is inconsistent with the approach 

taken in the exemptive orders applicable to CMSPs, but the obligations of the proposed rule and 

the exemptive order are separate and distinct from each other.  The terms of the exemptive order 

include certain obligations relating to (i) operational conditions (e.g., providing the Commission 

with certain audit reports, annual report, annual risk assessments, notice of significant system 

outages, advance notice of material changes, affirmation rate data, record retention, copies of 

service agreements, obligation to not perform any clearing agency function other than those 

permitted by the exemptive order); (ii) interoperability conditions relating to linkages and 

interfaces with other CMSPs; (iii) requirement to negotiate fair and reasonable prices relating to 

such interfaces; and (iv) obligations relating to customer charges for certain activities and 

information.  See GJVMS Exemption Order, supra note 326, at 20498–501.  These conditions 

were established to ensure that ITP Matching US will have sufficient operational and processing 

capacity to facilitate prompt and accurate matching services and are designed to enable the 

Commission to monitor its risk management procedures, operational capacity and safeguards, 

corporate structure and ability to operate in a manner to further the fundamental goals of section 

17A of the Exchange Act.  Proposed Rule 17Ad-27 would impose an additional and separate 

obligation to develop policies and procedures that facilitate STP.  In the exemptive order, the 

Commission has reserved the right to modify by order the terms, scope, or conditions of the 

exemption if it determines that such modification is necessary or appropriate in the public interest 

for the protection of investors, or otherwise in furtherance of the Exchange Act.  GJVMS 

Exemption Order, supra note 326, at 20501.  The Commission believes no such modification is 

necessary because proposed Rule 17Ad-27 is consistent with the conditions set forth within the 

exemptive order. 



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exemptive orders applicable to CMSPs clarify that, in reports required of CMSPs and their service 

providers indicating trade processing timeframes, the CMSP is not responsible for identifying the 

specific cause of any delay in performing its matching service where the fault for such delay is not 

attributable to the CMSP.335  DTCC ITP stated that the approach laid out in the exemptive order is 

the appropriate one because it explicitly acknowledges the fact that the CMSP does not have 

“perfect” control over all aspects of trade processing, even in instances where its systems 

otherwise have been reasonably designed to facilitate STP.  Accordingly, DTCC ITP maintains 

that introducing the reasonably designed policies and procedures standard would eliminate 

inconsistencies between the proposed rule and the exemptive orders. 

Third, DTCC ITP asserts that the proposed standard is inconsistent with the Commission’s 

economic analysis of proposed Rule 17Ad-27.336  Referring to the Commission’s statement in the 

T+1 Proposing Release that the policies and procedures requirement should result in the same 

estimated costs as similar policies and procedures requirements and burden estimates under other 

rules for registered clearing agencies, DTCC ITP noted that those requirements and the attendant 

compliance burdens and costs are based on a “reasonably designed” standard.337  Therefore, DTCC 

ITP stated that it does not believe that the proposed economic analysis relating to burdens and 

                                                 
335  See GJVMS Exemption Order, supra note 326, at 20500.  

336  See DTCC ITP April Letter, supra note 216, at 7. 

337  See id. 



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costs of proposed Rule 17Ad-27 is consistent with the underlying legal standard reflected in the 

proposed rule.338 

Fourth, DTCC ITP stated that “precedent shows” that the Commission’s stated STP goals 

can be achieved by using a standard that includes “reasonably designed.”  As examples, DTCC 

ITP cited to the requirements for registered clearing agencies, which it noted are “replete with 

obligations for such entities to have policies and procedures ‘reasonably designed’ to achieve a 

particular result.”339  Such an approach, DTCC ITP stated, allows the clearing agencies to use their 

experience and understanding of the markets they serve to shape the rules, policies, and procedures 

implementing such rules and such an approach with other clearing agencies’ rules has resulted in 

outcomes that benefit the resilience and ongoing evolution of the national clearance and settlement 

system.340  DTCC ITP also stated that CMSPs are already subject to a reasonably designed policies 

and procedures standard pursuant to their requirements under 17 CFR 242.1000 through 242.1007 

(“Regulation SCI”).341 

2. Use of ETCs and Manual Processes 

DTCC ITP stated that the proposed rule should not “abruptly force” or require an 

immediate “disorderly elimination” of ETC services and related manual processes used by market 

                                                 
338  See id.; see also infra Part VIII.C for further information on DTCC ITP’s comment 

regarding the Commission’s economic analysis. 

339  DTCC ITP April Letter, supra note 216, at 7.  DTCC ITP specifically cites to Rule 17Ad-

22(e), the set of Commission rule provisions applicable to covered clearing agencies.  See 17 CFR 

240.17Ad-22(e).   

340  See DTCC ITP April Letter, supra note 216, at 7.  

341  See id.; see also 17 CFR 242.1001 through 242.1007. 



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participants today.342  Instead, DTCC ITP recommended ensuring that the proposed rule does not 

force market participants to move away from ETC services in a sudden and disruptive manner and 

clarify the degree to which CMSPs are responsible for realizing the Commission’s goal of moving 

away from manual processes as soon as technologically practicable.343 

DTCC ITP requested additional clarity around the practical applications of manual 

processing when its use is necessary for, or its elimination may undermine, prompt and accurate 

settlement of transactions.344  Further, DTCC ITP noted that in certain circumstances the parties to 

a trade may need to engage in manual interventions to ensure the accuracy of trade and settlement 

                                                 
342  DTCC ITP April Letter, supra note 216, at 7.  See infra Part V.C.1 (discussing the 

Commission’s approach to the use of manual operations, including those related to ETC services, 

under adopted Rule 17Ad-27). 

343  See id. at 8–9.  The T+1 Proposing Release stated that with respect to the use of ETCs that 

impede the development of STP and which often rely on legacy technologies, a CMSP’s policies 

and procedures generally should establish a timeline for transitioning users away from such 

manual processes to service offerings that can reduce a party’s reliance on the manual, often 

sequential, entry and reconciliation of trade information.  T+1 Proposing Release, supra note 2, at 

10458.  However, as stated in that release, proposed Rule 17Ad-27 did not require CMSPs to 

remove manual processes if doing so would clearly undermine the prompt and accurate clearance 

and settlement of securities transactions.  See id. at 10458–59.  As discussed in Part V.C below, 

Rule 17Ad-27 will allow CMSPs some flexibility in designing policies and procedures that reduce 

or eliminate manual operations in a manner that does not undermine the CMSP’s obligations under 

section 17A of the Exchange Act and are appropriate for the CMSP’s particular operations, 

services, and business models.  See infra Part V.C.1.  This flexibility applies to CMSPs general 

operations as well as any associated with ETC services.  Moreover, if the ETC is not impeding the 

development of STP, the CMSP may determine the use and operations of the ETC is consistent 

with both the obligations required of CMSPs pursuant to adopted Rule 17Ad-27 as well as those 

under section 17A of the Exchange Act. 

344  See DTCC ITP April Letter, supra note 216, at 9.  DTCC ITP stated that more clarity is 

needed to better understand what constitutes a manual process and if, when, and how the use of 

manual processes may be acceptable under proposed Rule 17Ad-27.  For example, DTCC ITP 

cited the need for additional clarity as to how removing a manual process could “clearly 

undermine” settlement, what factors would be taken into account in applying this standard, and 

whether unmatched trades and fails or exceptions.  See id.   



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information and minimize operational or other risks that may prevent settlement.345  Therefore, 

according to DTCC ITP, the rule should not require without further study the removal of manual 

processes if doing so would undermine the prompt and accurate settlement of securities 

transactions.  Similarly, DTCC ITP stated that it seeks more clarity around the Commission’s 

description of the CMSP’s role in facilitating a transition away from manual processes, particularly 

as it relates to ETC services and timelines for transitioning away from manual processes, some of 

which may not be under the CMSP’s control.346 

DTCC ITP also raised concerns about the requirement that the CMSP explain in its policies 

and procedures why manual processes remain necessary as part of its systems and processes and 

consider developing processes that would eliminate the underlying issues that drive the use of 

manual process.347  It is unclear, according to DTCC ITP, how this requirement relates to the 

broader aspects of the proposal concerning the facilitation of STP.  By way of example, DTCC ITP 

posed a number of questions regarding: (i) how the requirement aligns with the requirement to 

facilitate STP; (ii) what practical efforts should the CMSP undertake when it considers developing 

processes that eliminate the underlying reason for the persistent use of manual processes; (iii) what 

is the relevancy of a cost benefit analysis in developing policies and procedures; and (iv) what 

particular factors a CMSP should consider.348  

                                                 
345  See id. 

346  See id. at 9–10.  

347  See id. at 10. 

348  See id.  As discussed in Part V.C of this release, the use of manual operations or automated 

operations that may result in manual intervention is a potential source of risk and costs both at the 

CMSPs and in the U.S. clearance and settlement system.  Moving towards a processing 

environment that facilitates STP at the CMSP should help alleviate some of these risks and costs.Conformed to Federal Register version 

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To help address these concerns, DTCC ITP recommended that the Commission provide 

further guidance in the form of high-level principles or standards regarding what is intended by the 

concept “as soon as technologically practicable” to minimize or eliminate manual processing for 

either the input of trade details or to resolve errors and exceptions that can prevent settlement.349  

DTCC ITP suggested that achieving something as soon as technologically practicable should entail 

a determination that the intended outcome is commercially reasonable, economically viable, and 

operationally scalable.350 

3. Amend the Annual Reporting Requirement to Better Achieve Transparency 

While generally supporting the requirement for CMSPs to file annual reports, DTCC ITP 

stated that it did not understand the particular elements it would be required to include in the 

annual report, or how those elements supported the Commission’s stated objectives of the annual 

                                                 

As stated in the T+1 Proposing Release, the Commission understands that at this time there may be 

certain scenarios where human intervention is necessary or prudent, however, as technology and 

the markets evolve over the near term, the expectation is that CMSPs would attempt to reduce or 

eliminate instances where human intervention is required.  T+1 Proposing Release, supra note 2, at 

10458–59.  

349  See DTCC ITP April Letter, supra note 216, at 10.  The T+1 Proposing Release stated that 

a CMSP facilitates STP when its policies and procedures enable its users to minimize or eliminate, 

to the greatest extent that is technologically practicable, the need for manual input of trade details 

or manual intervention to resolve errors and exceptions that can prevent settlement of the trade.  A 

CMSP also facilitates straight-through processing when it enables, to the greatest extent that is 

technologically practicable, the transmission of messages regarding errors, exceptions, and 

settlement status information among the parties to a trade and their settlement agents.  T+1 

Proposing Release, supra note 2, at 10458.  However, as discussed in Part V.C.2 below, there may 

be situations where the minimization or elimination of certain manual operations is not appropriate 

or feasible in the near term.  The facts and circumstances determining “as soon as technologically 

practicable” will vary across CMSPs, depending upon their services, systems, and business 

models.  Accordingly, CMSPs should generally use their expertise to assess the extent to which a 

specific policy or procedure is appropriately designed to facilitate STP.  

350  See DTCC ITP April Letter, supra note 216, at 10.  



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report, and expressed concerns about a CMSP’s ability to complete the annual report consistent 

with the Commission’s goals.351  DTCC ITP also expressed concerns that a description of some 

types of information in its policies and procedures may contain proprietary or confidential 

information, and as such, a description of its policies and procedures should not be required in the 

annual report.352  As an alternative, DTCC ITP recommended that the annual report provision of 

the proposed rule be amended to focus more on quantitative reporting and less on qualitative 

descriptive reporting.  Specifically, DTCC ITP recommended eliminating proposed subsections (a) 

through (c) of proposed Rule 17Ad-27 requiring specified descriptions, and instead recommended 

including a requirement in the rule text for public reporting of quantitative data on an anonymized 

and aggregated level for rates of allocation, confirmation, affirmation and/or matching over the 

twelve month period covered by the report.353  Further, DTCC ITP suggested disclosure of 

additional data elements, such as affirmation rates for institutional trade and prime brokerage trade 

flows, and affirmation rates for institutional trade flows achieved separately through an ETC or 

through a central matching facility.354 

                                                 
351  See id. at 11.  For example, DTCC ITP expressed concerns that the term “description” 

needs more clarity related to required content and level of detail. 

352  See id.  DTCC ITP stated that requiring a CMSP to engage in the future cost and effort of 

analyzing the need for confidential treatment of such information will impede efforts by CMSP to 

innovate.  See infra Part V.C.2 for the Commission’s discussion of treatment of confidential 

information. 

353  See DTCC ITP April Letter, supra note 216, at 12.  As discussed further in Part V.C.2 

below, the Commission is retaining the qualitative and quantitative aspects of the annual report, 

but has modified that requirement to address the anonymization and aggregation issues described 

in this comment letter.   

354  See id.; see also infra Part V.C.2 for the discussion of the metric requirements under Rule 

17Ad-27(b), as adopted. 



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To provide further detail regarding the content of the annual report as it relates to 

quantitative reporting requirements, DTCC ITP submitted its second comment letter.355  Based on 

its review of the data available in its systems, DTCC ITP stated its belief that certain high-level 

categories of metrics that should be included in the rule text for proposed Rule 17Ad-27 to help 

objectively demonstrate trends toward more automation, less manual intervention, and progress 

towards STP.356  Defining specific metric categories, DTCC ITP stated, would promote 

consistency and clarity across reporting and leave some flexibility for CMSPs to provide metrics 

which may be most appropriate to their specific activities and services.357  Recommendations for 

specific data categories included: (i) trade volume metrics, such as the total number of allocations 

and confirms submitted to a CMSP’s matching service and total number of confirmations and 

cancelled confirmations submitted to an ETC service; (ii) matching metrics, such as the percentage 

of allocations and confirmations submitted to the CMSP that are matched or matched/auto-

affirmed by specified timeframes on trade date; (iii) affirmation metrics, including the percentage 

of institutional and prime broker confirmations submitted to an ETC that are affirmed by specified 

timeframes on trade date; and (iv) STP metrics, such as data concerning manual processes.358 

                                                 
355  See DTCC ITP September Letter, supra note 325. 

356  See id. at 2. 

357  See id. 

358  See id. at 2–3.  Part V.C.2 below further discusses the quantitative data requirements under 

Rule 17Ad-27(b), as modified.  As discussed in that section, the Commission is opting to specify 

the particular data required under the rule rather than require data categories to ensure the data will 

capture specific information that can enable effective analysis of the CMSPs’ progress in 

facilitating STP.   



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DTCC ITP also requested clarity as to when CMSPs would be required to submit their 

initial annual reports, as well as the time period applicable to the actual content to be included in 

the initial annual report.359  DTCC ITP recommended that the initial twelve-month reporting 

period should begin after both the T+1 compliance date and the same-day affirmation rules come 

into effect, which according to DTCC ITP will provide a baseline that is predicated on 

implementation of all Commission requirements designed for a T+1 settlement cycle, and will 

provide a clear review and analysis of progress in advancing STP on a year-by-year basis without 

having to adjust to interpret reporting periods when the rules were not entirely in effect across the 

whole post-trade market.360   

4. Support Further Standardization of Industry Protocols and Reference Data 

DTCC ITP recommended that the Commission prioritize the development of proposals 

requiring market participants to increase the use of standardized settlement instructions 

(“SSIs”).361  Promoting greater adoption of SSIs, DTCC ITP stated, is critical to addressing the 

potential risk of settlement errors and fails in a T+1 environment, and DTCC ITP further stated its 

belief that centrally managed SSIs become even more critical in terms of the secure transmission 

                                                 
359  See id. at 3.  Part V.C.3 below further discusses the required contents and timing of the 

initial and subsequent annual reports under adopted Rule 17Ad-27(c). 

360  See id.  DTCC ITP indicated in its comment letter that it is considering publishing the 

annual report on its website to provide the public with ready access to the information.  See id. at 

4.  Part V.C.4 below further describes the filing requirements and provides related guidance 

regarding the filing of the annual report. 

361  See DTCC ITP April Letter, supra note 216, at 8.  The use of SSIs is just one of many 

standardization mechanisms available to assist CMSPs in streamlining their internal operations to 

reduce reliance on manual processes, which can facilitate STP.  Part V.C.1 below discusses SSIs in 

the context of the development of the CMSP’s policies and procedures under Rule 17Ad-27(a).  

See infra note 386.   



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of sensitive account and reference data necessary for settlement.362  DTCC ITP asserted that 

increased focus on, and the consequences of, cyber risk and fraudulent activity also necessitate the 

need for fully automated and centralized management and secure communication of critical SSI 

reference data, and noted an industry survey that indicated SSI-related issues continue to be one of 

the most common reasons for settlement fails.363  

C. Final Rule and Discussion 

CMSPs facilitate communications among a broker-dealer, an institutional investor or its 

investment adviser, and the institutional investor’s custodian to reach agreement on the details of a 

securities transaction, enabling the trade allocation, confirmation, affirmation, and/or the matching 

of institutional trades.364  Once the trade details have been agreed among the parties or matched by 

the CMSP, the CMSP can then facilitate settlement of the transaction.   

As mentioned above and detailed in the T+1 Proposing Release, the rising volume of 

transactions for which CMSPs provide matching and other services have caused CMSPs to become 

increasingly critical to the functioning of the securities market.365  The Commission anticipates 

that a shortened settlement cycle may lead to further expanded use of CMSPs, as well as increased 

focus on enhancing the services and operations of the CMSPs themselves.366  In addition, some 

                                                 
362  See id. 

363  See id. 

364  For a general description of the role of CMSPs in the U.S. markets, see T+1 Proposing 

Release, supra note 2, at 10439. 

365  See supra note 315 and accompanying text.  

366  See T+2 Proposing Release, supra note 4, at 69258.  For example, increasing the efficiency 

of using a CMSP can reduce the risk that a trade will fail to settle and reduce costs associated with 



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SRO rules currently require the use of CMSP services for institutional trade processing.367  The 

Commission believes that more could and should be done to ensure that CMSPs, as critical utilities 

in the securities market, are operating in a manner that improves the clearance and settlement of 

securities transactions through improvements in efficiency, risk reduction, and costs.  Reducing 

and, where possible, eliminating the use of tools and services that encourage or require manual 

processing, along with the continued development and implementation of more efficient automated 

systems that facilitate STP in the institutional trade processing environment at the CMSP, is 

essential to improving those efficiencies, as well as reducing risk and costs, to ensure the prompt 

and accurate clearance and settlement of securities transactions.368   

Over the past decade CMSPs have become increasingly connected to a wide variety of 

market participants in the U.S.369  New Rule 17Ad-27 will require CMSPs, and by extension their 

users, to assess their processes and find solutions to reduce or eliminate reliance on services at 

CMSPs that involve manual or inefficient processes or otherwise do not further facilitate STP in 

the institutional trade processing environment.  This in turn should better position CMSPs to 

provide services that not only reduce processing risk and costs, but also generally facilitate a more 

                                                 

correcting errors that result from the use of manual processes and data entry, thereby improving 

the overall efficiency of the U.S. clearance and settlement system.   

367  See, e.g., Financial Industry Regulatory Authority (FINRA) Rule 11860 (requiring a 

broker-dealer to use a registered clearing agency, a CMSP, or a qualified vendor to complete 

delivery-versus-payment transactions with their customers). 

368  See T+1 Report, supra note 61, at 9. 

369  See, e.g., DTCC, About DTCC Institutional Trade Processing, 

https://www.dtcc.com/about/businesses-and-subsidiaries/dtccitp (noting that DTCC ITP, parent to 

DTCC ITP Matching, serves 6,000 financial services firms in 52 countries).  

https://www.dtcc.com/about/businesses-and-subsidiaries/dtccitp


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orderly transition to a T+1 standard settlement cycle in the near term,370 as well as potential further 

shortening of the settlement cycle in the future. 

Accordingly, the Commission is adopting proposed Rule 17Ad-27 with modifications.  As 

explained further below, the Commission is adding the language “reasonably designed” to the 

policies and procedures requirement in paragraph (a), adding additional requirements in paragraph 

(b) to specify the data to be included in the annual report, and adding paragraph (c) to explain the 

required timing of filing the annual report.  The Commission believes these changes are responsive 

to the commenter’s concerns and provide CMSPs flexibility to address individualized operations, 

services, types of users, and business objectives, and provide specificity to the data requirements 

while at the same time retaining those provisions that facilitate achieving the stated objectives of 

the new rule.  In addition, and as discussed in more detail below, the Commission is making 

several technical modifications, including reorganizing the specific obligations under the proposed 

rule by subdividing those obligations into paragraphs (a) through (d), and adopting revisions to 

other technical aspects of and terms used in the proposed rule text to improve clarity.   

1. New Rule 17Ad-27(a) – Requirement for Policies and Procedures 

As discussed below, the Commission is retaining the proposed requirement in Rule 17Ad-

27 to establish, implement, maintain, and enforce policies and policies, but is making several 

modifications.   As with the proposed rule, the final rule will require CMSPs to develop policies 

and procedures focused on facilitating improvements in their operations, systems, and user 

                                                 
370  As discussed in Part II above, the T+1 Report contemplates moving the “ITP Affirmation 

Cutoff” from 11:30 a.m. ET on the day after trade date to 9:00 p.m. ET on trade date.  See T+1 

Report, supra note 61, at 13, 39.  



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obligations to further the development of STP371 in the processing of institutional trades, improve 

efficiency, facilitate both cost and risk reduction in the clearance and settlement of institutional 

trades generally, and better accommodate shorter settlement cycles.372  The requirement to 

establish, implement, maintain and enforce policies and procedures in new Rule 17Ad-27(a) is as 

an important and efficient mechanism that will require CMSPs, and by extension those market 

participants that choose to rely on CMSPs to facilitate clearance and settlement, to develop and 

implement specific operational procedures and systems to facilitate STP.  This, in turn, will enable, 

over time, STP in the post-trade processing of institutional trades.  Importantly, the rule will also 

encourage the development of strategic plans on a forward-looking basis to facilitate STP within 

the CMSP’s operating framework and to facilitate internal and external assessments as to the 

viability and implementation of those strategic plans.  By virtue of the expanded use of CMSPs 

generally and the global nature of post-trade processing today, the Commission anticipates that 

these efforts will require CMSPs to coordinate their development activities with a variety of other 

market participants that impact the CMSPs’ ability to provide beneficial efficiencies, which should 

                                                 
371  As discussed above, the term “straight-through processing,” as used by the financial 

services industry, generally refers to processes that allow for the automation of the entire trade 

process from trade execution through settlement without manual intervention.  See supra note 330.  

In the context of institutional trade processing under this rule, STP occurs when a market 

participant or its agent uses the facilities of a CMSP to enter trade details and completes the trade 

allocation, confirmation, affirmation, matching processes, or any combination thereof, without 

manual intervention.   

372  In some cases, the use of manual or inefficient processing introduces errors and operational 

risks that delay settlement and may result in a failure to settle the transaction.  The Commission 

believes that, by engaging in the process of developing and periodically assessing their policies 

and procedures, CMSPs will not only foster solutions to mitigate or alleviate these inefficiencies 

and risks internally but also consider these issues as they apply to the general processing stream 

that may be relevant to the CMSP’s operations and its users.  



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in turn encourage the use of CMSPs.  Finally, the development of policies and procedures by 

CMSPs will facilitate the Commission’s ongoing development of the national clearance and 

settlement system generally by enhancing the oversight of CMSPs and ensuring a documented 

approach to further STP. 

Specifically Rule 17Ad-27(a), as adopted, requires a clearing agency that provides a central 

matching service (i.e., a CMSP) to establish, implement, maintain, and enforce written policies and 

procedures reasonably designed to facilitate straight-through processing of securities transactions 

at the clearing agency.373  Because the policies and procedures requirement is distinct from the 

annual report requirement (discussed below), this requirement is now designated as new paragraph 

(a) in final Rule 17Ad-27, as adopted.  The final rule also removes the reference to “transactions 

involving broker-dealers and their customers” because it is only explanatory text describing the 

types of parties that may use a central matching service and therefore is unnecessary to include in 

the rule text.374  Lastly, the final rule makes clear that the policies and procedures must be 

“written.” 

The provision to “establish, implement, maintain, and enforce” written policies and 

procedures requires the CMSP to establish and implement such policies and procedures by the 

compliance date and to ensure that the policies and procedures remain current on an ongoing basis, 

including by implementing timely updates or revisions.375  Moreover, the requirement to “enforce” 

                                                 
373  The new rule text adds the word “written” to the policies and procedures requirement to 

require that the policies and procedures must be established as a written document.  

374  See, e.g., Bloomberg STP and SS&C Techs Exemption Order, supra note 326, at 75388–90 

(generally describing the clearing agency applicants as providers of a “matching service” or 

“central matching service” without reference to the types of customers served). 

375  See infra Part VII for a discussion of the compliance dates.  



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requires the CMSP to develop a reasonable approach with sufficient specificity to ensure that its 

users comply with any required user obligations and to make clear any consequences of non-

compliance within the established policies and procedures framework and the timeframes 

associated with any such consequences.  The Commission encourages, but does not require, the 

CMSP to provide users with access to the required CMSP policies and procedures well in advance 

of any compliance obligations applicable to users to ensure that they can thus make the necessary 

arrangements or changes to comply with any user obligations contained therein.   

The periodic review required by the “establish, implement and maintain” component of the 

CMSP’s policies and procedures requirement under adopted Rule 17Ad-27(a) should also help 

ensure that a CMSP considers in a holistic fashion how the obligations it requires of its users will 

advance the implementation of methodologies, operational capabilities, systems, or services that 

support STP.  It should also encourage the CMSP and its users to identify inefficiencies and 

manual processes that impede the STP objective and, to the extent possible, develop automated 

and streamlined solutions to address those issues.   

The scope of the policies and procedures required under new paragraph (a) generally 

should focus on those aspects of the CMSP’s operations and services that directly or indirectly 

relate to facilitating STP in the processing of institutional trades at the CMSP.376  The Commission 

understands that the CMSP only controls its internal functions, and not those of its users, and as 

such, the rule as adopted requires the CMSP to design its policies and procedures around its own 

                                                 
376  Accordingly, those aspects of the CMSP’s operations or services that are not directly or 

indirectly related to facilitating STP are not required to be included in the policies and procedures 

required under Rule 17Ad-27(a).  However, the rule does not preclude the CMSP from adopting 

policies and procedures that are beyond the scope of Rule 17Ad-27(a). 



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internal functions and services.  However, and to the extent practicable, the Commission 

encourages CMSPs to develop a policies and procedures framework that incentivizes CMSP users 

and their customers to adopt and implement the necessary systems and services within their own 

firms to make full use of the CMSP’s systems that facilitate STP.377  While some of this may occur 

organically as CMSP users that agree to use specific CMSP services or systems reconfigure their 

systems to accommodate the initial and updated CMSP policies and procedures, CMSPs generally 

should also endeavor to create incentives within the policies and procedures framework that 

encourage more widespread use of their STP-oriented systems, both among current CMSP and 

non-CMSP users.  For example, creating cost-saving operational efficiencies within the CMSP or 

developing attractive price structures may create incentives for more widespread use of the CMSPs 

services. 

Moreover, the policies and procedures framework generally should also endeavor, to the 

extent prudent, to dis-incentivize the use of manual systems or automated systems that do not 

facilitate STP.378  The Commission views the facilitation of STP as providing the necessary 

                                                 
377   While the CMSPs policies and procedures will directly affect the systems and processes of 

its users by requiring the use of those systems and processes to be in compliance with the CMSP’s 

STP friendly systems and processes, the CMSP’s STP efforts also may indirectly affect the 

systems and process of other non-user market participants that either interact with CMSP users or 

by virtue of the CMSP role as a centralized utility in the market.  The standardization of industry 

practices toward realizing increased STP capabilities internal and external to the CMSPs should in 

turn promote the eventual elimination of manual processing.   

378  For example, as noted by DTCC ITP in its comment letter, systems or operations that 

standardize certain operational functions, such as the use of SSIs, may help alleviate the need for 

manual operations.  See DTCC ITP September Letter, supra note 325, at 2–3.  However, as noted 

above, the use of SSIs is just one of many mechanisms available to assist CMSPs in streamlining 

their internal operations and in turn facilitating STP.  Given that individual CMSPs may vary in the 

services provided or the operations and systems used to provide those services, to the extent that 

the use of SSIs is applicable in a particular CMSP’s operations, the Commission encourages the 

CMSPs to consider developing incentives or requirements in their policies and procedures to 

encourage or compel the use of SSIs.  See supra note 361. 



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efficiencies, both on a technological, operational, and service level, to remove to the extent 

practicable and prudent the need for manual intervention (or automated systems that result in the 

need for manual intervention) in the acceptance of trade information and the process by which the 

CMSP provides for allocation, confirmation, affirmation, and matching services.  The Commission 

also understands that at this time there may be scenarios where human intervention is necessary or 

prudent.  However, as technology and the markets evolve over the near term, CMSPs should 

consider reducing or eliminating instances where human intervention is required as soon as 

reasonably possible, both on a technological and operational basis.   

To provide flexibility and discretion in the development of a particular CMSP’s policies 

and procedures, the Commission is adding the new language “reasonably designed” to the policies 

and procedures requirement in final Rule 17Ad-27(a), as adopted.  The insertion of the language 

“reasonably designed” in the policies and procedures requirement should allow CMSPs to tailor 

their policies and procedures to accommodate their individualized internal operations, systems, 

business models and users as they determine how best to facilitate STP within their particular 

processing environment and to mitigate any issues particular to that CMSP that frustrate achieving 

STP.  That discretion should allow the CMSP to determine whether specific policies and 

procedures designed to further STP are reasonable relative to certain considerations applicable to 

that particular CMSP and its users, particularly as those assessments may change over time.  

Moreover, and as explained by the commenter, given that other Commission rules applicable to 

clearing agencies incorporate a “reasonably designed” component in the policies and procedures 



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required under such rules, CMSPs should have familiarity and experience in drafting “reasonably 

designed” policies and procedures, as required by new Rule 17Ad-27(a).379    

In structuring a plan to facilitate STP through reasonably designed policies and procedures, 

a CMSP generally should evaluate its operations and systems to determine potential sources of 

inefficiency or manual operation that exist within the current CMSP’s processing stream, and 

consider addressing these frictions in a manner that does not disrupt the CMSP’s ability to 

facilitate the prompt and accurate settlement of securities transactions.380  Rule 17Ad-27 does not 

require CMSPs to force market participants to move away from ETC services in a sudden and 

disruptive manner or eliminate manual processing completely or on any particular timeframe if 

doing so would result in creating inefficiencies or impair the prompt and accurate settlement of 

securities transactions.381  CMSPs generally should, however, review their STP plans annually to 

assess whether new disincentives to use manual processes are appropriate, particularly in light of 

any recent market changes or technological innovations.    

                                                 
379  See, e.g., 17 CFR 232.1001(a)(1), (b)(1), and (c)(1) (relating to the policies and procedures 

requirements under Regulation SCI).  Regulation SCI is applicable to both clearing agencies that 

are registered as well as those that are exempted from registration.  See, e.g., 17 CFR 240.17Ad-

22(d) and (e) (relating to the core clearing agency rules under section 17A of the Exchange Act, 

which are applicable to only those clearing agencies that are registered). 

380  The use of manual operations may arise for a number of reasons, including because (i) 

there is no automated system that facilitates a particular activity; (ii) a user has not availed itself of 

the automated process offered by a CMSP; or (iii) input into an automated system is rejected, 

resulting in the need to manually reconcile the situation.  STP endeavors to eliminate manual 

processes by automating the entire trade process from trade execution through settlement without 

manual intervention.  See T+1 Proposing Release, supra note 2, at 10458; see also supra note 323 

and accompanying text. 

381  See supra Part V.B.2 (discussing DTCC ITP comments regarding manual processing). 



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As it develops its policies and procedures to facilitate STP, a CMSP may consider factors 

relevant to that CMSP in assessing whether any identified issues can or should be addressed and if 

so, how best to implement those changes.382  For example, such factors may include: (i) the 

significance of certain obstacles to STP as it relates to other clearance and settlement functions and 

objectives, including operational efficiency and operational risk management; (ii) the frequency 

and impact of a particular issue; or (iii) the cost of resolving the issue versus the benefit.  The 

flexibility afforded by the insertion of the reasonably designed language in new Rule 17Ad-27(a) 

also should allow CMSPs to better account for changes over time in technology, markets, business, 

and other advancements that promote accurate clearance and settlement, as well as any costs 

associated with particular policies or procedures relative to the benefits.  Accordingly, the 

inclusion of “reasonably designed” should aid in the development of more effective and efficient 

CMSP policies and procedures required under Rule 17Ad-27, as adopted. 

 

Under the rule, a CMSP facilitates STP when its policies and procedures enable its users to 

minimize or eliminate, to the greatest extent that is technologically practicable, the need for 

manual input of trade details, the manual intervention to resolve errors and exceptions that can 

prevent settlement of the trade, or the transmission of messages regarding errors, exceptions, and 

settlement status information among the parties to a trade and their settlement agents that impede 

the ability of the CMSP to achieve an STP environment.  In considering generally how to develop 

policies and procedures that facilitate STP, a CMSP generally should consider the full range of 

                                                 
382   As discussed further below, the CMSP will be required pursuant to Rule 17Ad-27(b)(2) to 

provide a qualitative description of its progress in facilitating STP in its annual report to the 

Commission.  For example, the report may describe the CMSP’s approach and rationale for 

addressing or not addressing any issues identified as obstacles to facilitating STP.  See infra Part 

V.C.2. 



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operations and services related to the processing of institutional trades for settlement and establish 

a holistic framework for STP on a CMSP-wide basis.  CMSPs should also generally consider and 

address how the services, systems, and any operational requirements a CMSP applies to its users 

ensure that the CMSP’s policies and procedures advance the goal of achieving straight-through 

processing for trades processed through it.  Moreover, the CMSP generally should ensure that its 

systems, operational requirements, and the other choices it makes in designing its services, enable 

and incentivize prompt and accurate settlement without manual intervention or without automated 

processes that may result in manual intervention. 

For example, a CMSP’s policies and procedures generally should explain the criteria that 

the CMSP applies to determine when a “match” has been achieved, including any relevant 

tolerances that it or its users might apply to achieve a match, and the extent to which such criteria 

should be standardized or customized.383  With respect to the use of ETCs that impede the 

development of STP, and which often rely on legacy technologies, a CMSP’s policies and 

procedures generally should establish a timeline for transitioning users away from such manual 

processes to service offerings that can reduce a party’s reliance on the manual, often sequential, 

entry and reconciliation of trade information.384  Where the CMSP acts as a communication 

                                                 
383  The use of SSIs is just one of many standardization mechanisms available to assist CMSPs 

in streamlining their internal operations to reduce reliance on manual processes, which can 

facilitate STP.  Given that individual CMSPs may vary in the services provided or the operations 

and systems used to provide those services, the Commission does not believe requiring the use of 

SSI, or any other particular standardization mechanism, in Rule 17Ad-27 would be appropriate.  

However, to the extent that the use of SSIs is applicable in a particular CMSP’s operations, the 

CMSP generally should consider developing incentives or requirements in its policies and 

procedures to encourage or compel the use of SSIs.  See supra note 362. 

384  In its comment letter, DTCC ITP sought more clarity around the Commission’s description 

of the CMSP’s role in facilitating a transition away from manual processes, particularly as it 

relates to ETC services and timelines for transitioning away from manual processes, some of 



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platform for different market participants to transmit messages regarding errors, exceptions, and 

settlement status information among the parties to a trade and their settlement agents, the CMSP 

generally should consider the extent to which its policies, procedures, and processes restrict, 

inhibit, or delay the ability of users to transmit such messages used in the preparation or 

transmission of trades for settlement and have policies and procedures that promote the automated 

transmission of messages among the relevant parties to a transaction to ensure timely settlement 

and reduce the potential for errors.   

The Commission recognizes it may not be technologically or operationally practicable to 

eliminate all manual processes immediately.  Indeed, in certain circumstances, the parties to a trade 

may need to engage in manual interventions to ensure the accuracy of trade information and 

minimize operational or other risks that may prevent settlement.  Rule 17Ad-27(a), as adopted, 

does not require CMSPs to remove a manual process if doing so would clearly undermine the 

prompt and accurate clearance and settlement of securities transactions.  However, where a CMSP 

continues to permit manual reconciliation or other types of human intervention, it generally should 

explain in its policies and procedures why those manual processes remain necessary as part of its 

systems and processes and initiate incremental steps to alleviate the need for any manual process.  

In addition, the CMSP should consider developing processes that ultimately would eliminate the 

underlying issues that drive the use of manual processes in order to facilitate a more automated and 

STP-focused approach. 

2. New Rule 17Ad-27(b) - Annual Report  

                                                 

which may not be under the CMSP’s control.  See DTCC ITP April Letter, supra note 216, at 7.  

As discussed above, the Commission is not advocating the elimination of ETC to the extent that its 

use does not impede the development of STP at the CMSP.  In the event that use of the ETC is 

impeding STP, CMSPs generally should use their expertise to develop an appropriate methodology 

and timeframe to transition away from the use of such ETC. 



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The Commission is retaining the general requirement under proposed Rule 17Ad-27 to 

require a CMSP to submit a report every twelve months to the Commission that includes specified 

qualitative and quantitative information used to assess the CMSP’s progress in facilitating STP 

during the twelve-month period covered by the annual report.  However, as explained in more 

detail below, the Commission is making one substantive and several technical modifications to the 

final rule, as adopted.  The purpose of these modifications is to require the CMSPs to disclose 

qualitative and quantitative information in the annual report.  The Commission continues to 

believe that the annual report component of Rule 17Ad-27(b), as adopted, will enable the 

Commission to (i) assess the qualitative and quantitative progress made by the CMSP and its users 

to further STP efforts in the processing of institutional transactions; (ii) evaluate the need for 

additional regulatory action; and (iii) further its oversight of, and the development of, the national 

clearance and settlement system. 

The Commission is retaining the 12-month reporting timeframe requirement, as proposed, 

for the annual report under new Rule 17Ad-27(b) for several reasons.  First, a yearly review on 

progress with respect to the CMSP’s efforts to facilitate STP should be a sufficient timeframe in 

which the CMSP is able to consider, develop, and implement iterative improvements over time on 

a forward-looking basis, while also ensuring that progress towards STP is describable, 

measureable and implemented as expeditiously and prudently possible.  Second, a twelve month 

period would provide the CMSP with a sufficient look-back period to complete a meaningful 

review on an organization-wide basis and time to test the efficacy of any material changes to 

technologies and procedures in the preceding year.   

Third, an annual reporting requirement, as opposed to a monthly or semi-annual 

requirement, should help ensure that the information provided to the Commission reflects 



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meaningful and substantive progress by the CMSP, as opposed to focusing attention on smaller, 

technical changes in services and policies that would be less relevant or less informative to the 

CMSP, its users, the Commission, or the public as to their understanding of the overall progress 

towards achieving straight-through processing by the CMSP.  And fourth, the Commission 

believes that the annual report requirement, as now structured in adopted Rule 17Ad-27, would 

enable the Commission to evaluate actions taken by the CMSP to ensure compliance with the rule 

and to help fulfill the Commission’s responsibility for oversight of the national clearance and 

settlement system, both as it relates to the CMSP specifically and the national system more 

generally.   

New Rule 17Ad-27(b) also retains the general requirement to provide both qualitative and 

quantitative information in the annual report, as proposed.  The Commission believes that both 

types of analysis are necessary to better explain the current operational environment relative to 

STP development and the obstacles preventing further STP development, and to provide 

appropriate context to the metrics, from a current as well as a retrospective and prospective 

viewpoint.  Moreover, the qualitative aspects of the requirements under paragraph (b) will provide 

the Commission with the CMSP’s expertise in the assessments and analysis of its STP progress, 

providing additional context for the quantitative data required in the annual report. 

The Commission also is retaining the provision making the annual report required under 

adopted Rule 17Ad-27(b) publicly available on its website to enable the public to review and 

analyze progress on achieving STP.385  As discussed in the T+1 Proposing Release and detailed 

                                                 
385  DTCC ITP indicated in its comment letter that it is considering publishing the annual report 

on its website to provide the public with ready access to the information.  See DTCC ITP 

September Letter, supra note 325, at 4. 



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below, to the extent that an annual report includes confidential commercial or financial 

information, a CMSP can request confidential treatment of those specific portions of the report.386 

To clarify that the content of the annual report requirement is distinct from the policies and 

procedures requirement (discussed above), the annual report requirement is now designated as new 

paragraph (b) under the adopted Rule 17Ad-27.  Specifically, new Rule 17Ad-27(b), as adopted, 

requires a clearing agency that provides a central matching service for transactions involving users 

to submit to the Commission every twelve months a report that includes five component 

requirements, now delineated as Rule 17Ad-27(b)(1) through (5).  Paragraphs (b)(1), (2), and (5) 

include modified versions of the proposed requirements under proposed Rule 17Ad-27(a), (b), and 

(c).  In addition, new paragraph (b) includes paragraphs (b)(3) and (4) which detail the data 

elements required in the report, consistent with the discussion in the T+1 Proposing Release but 

not specified in the rule text as proposed.387  In particular, paragraphs (b)(3) and (4) incorporate the 

substance of the recommendations made by DTCC ITP requesting more specificity for the data 

required to be included in the report under the rule.388  The Commission believes that these 

changes are consistent with its intent as to the contents and objective of the annual report, as 

proposed, and should provide beneficial clarity to CMSPs regarding their obligations under these 

provisions. 

                                                 
386  See 17 CFR 240.24b-2. 

387  A CMSP generally should include in its report a summary of key settlement data relevant 

to its STP objective, such as data related to the rates of allocation, confirmation, affirmation, 

and/or matching achieved via straight-through processing.  See T+1 Proposing Release, supra note 

2, at 10459. 

388  See DTCC ITP September Letter, supra note 325, at 2–3.  



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The Commission is also amending paragraph (b) to delete the phrase “for transactions 

involving broker-dealers and their customers” for the same reason it deleted the text in paragraph 

(a), as discussed in Part V.C.1.   

a) New Rule 17Ad-27(b)(1) – Summary of Policies and Procedures  

The first of the five components under adopted Rule 17Ad-27(b) requires the CMSP to 

provide pursuant to new paragraph (b)(1) a summary of its policies and procedures required under 

adopted Rule 17Ad-27(a), current as of the last day of the twelve month period covered by the 

report.  The Commission is making a technical change to paragraph (b)(1) to clarify that only a 

“summary” of the CMSP’s policies and procedures current as of the last day of the twelve month 

period covered by the report need be included in the report, and not the policies and procedures in 

their entirety or policies and procedures current under any other timeframe.389  Today, CMSPs’ 

policies and procedures are not publicly available.  By providing a summary of the CMSPs 

policies and procedures, the Commission, indirect CMSP users, and the public will be able to 

understand at a high level the important aspects of the CMSP’s operations and systems, which the 

Commission anticipates will in turn facilitate market-wide discussions regarding the adoption of 

more efficient post-trade processing generally and within the context of using CMSPs for some or 

all of a market participant’s post-trade processing needs specifically.  Moreover, this information 

should help readers of the annual report to be better able to analyze other aspects of the annual 

report, particularly those related to the quantitative and forward-looking qualitative information 

required under the rule, as adopted.   

                                                 
389  Proposed Rule 17Ad-27(a) required that the annual report must include “[I]t’s current 

policies and procedures for facilitating straight-through processing.”  T+1 Proposing Release, 

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The summary description of the CMSP’s policies and procedures required by paragraph 

(b)(1) generally should provide a brief overview of the policies and procedures developed pursuant 

to new Rule 17Ad-27(a).  To the extent applicable, the scope of the summary generally should 

focus on those aspects of the CMSP’s policies and procedures that describe and explain its 

operations, systems, services, and user obligations generally and those aspects of its policies and 

procedures that facilitate STP-oriented operations or systems specifically, including any material 

changes made to the relevant policies and procedures during the reporting period.  Because the 

Commission will make the report publicly available, it would be helpful for a CMSP to orient the 

information contained in the summary to market participants that engage in the post-trade 

processing of securities transactions to help ensure that the report is useful and informative to both 

existing and potential users.  

b) New Rule 17Ad-27(b)(2) – Qualitative Description of STP 

Progress 

The second component of the annual report under adopted Rule 17Ad-27(b) requires the 

CMSP to provide pursuant to new paragraph (b)(2) a qualitative description of the CMSP’s 

progress in facilitating STP during the twelve-month period covered by the report required under 

paragraph (b)(1).  The Commission is modifying the proposed requirement, formerly in proposed 

Rule 17Ad-27(b), to add the text “qualitative description” in new paragraph (b)(2) to clarify the 

type of information required in the CMSP’s description of its progress in facilitating STP during 

the period covered by the report and to assist CMSP compliance with this provision of the rule.   

The qualitative report required under paragraph (b)(2) will provide the Commission and the 

public with an understanding of the specific actions the CMSP has taken over the twelve-month 

period covered by the report to facilitate STP.  To the extent practicable, the Commission 

encourages CMSPs to use their expertise to include their assessment of the impact of any actions 



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discussed in the qualitative section of the report on the furtherance of its STP efforts, both as it 

relates to the CMSP specifically and the markets generally.  The Commission and CMSP users 

will use this information to better understand the CMSP’s STP initiatives, as well as encourage 

market participants to begin analyzing their own internal systems and operations to develop and 

incorporate more STP-oriented mechanisms themselves.  In addition, the qualitative report 

required under this provision should also help inform an analysis of the quantitative data required 

under new Rule 17Ad-27(b)(3) and (4) by providing context for the metrics regarding the efficacy 

of the CMSP’s actions to facilitate STP.   

A qualitative description of the CMSPs progress during the twelve month period covered 

by the report generally should describe the services and systems used during the period covered by 

the report that illustrate the CMSP’s progress in facilitating STP, as well as any applicable analysis 

or additional information that aids in understanding or supporting the qualitative description.  This 

qualitative description should generally focus on the CMSP’s progress in facilitating STP with 

respect to the processes used in the allocation, confirmation, affirmation, and matching of 

institutional trades, the communication of messages among the parties to the transactions, and the 

availability of service offerings that reduce or eliminate the need for manual processing.  However, 

the CMSP should consider including any reasonable and applicable indicia of STP progress to 

supplement their descriptions under paragraph (b). 

As is the case with other provisions of adopted Rule 17Ad-27(b), the qualitative description 

submitted pursuant to Rule 17Ad-27(b)(2) in the first reporting period may benefit from a more 

robust discussion of the current systems used by the CMSP in order to put a discussion of its STP 



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progress in context.390  However, the qualitative description in subsequent annual reports should 

generally be able to build on the initial report by relying on any background or foundational 

information provided in the initial reporting period, and instead focus primarily on the current 

year’s progress. 

c) New Rule 17Ad-27(b)(3) – Quantitative Data  

The third component of the annual report required under adopted Rule 17Ad-27(b) requires 

the CMSP to include pursuant to new paragraph (b)(3) a quantitative presentation of data that 

specifies five sets of data.  The Commission concurs with DTCC ITP’s recommendation that any 

requirements to include specific data in the annual report should be expressly included in the rule 

text. 391  While DTCC ITP recommended specifying in the rule certain categories of data, the 

Commission is opting to break down those categories into the specific data elements described in 

paragraph (b)(3).392  Specifying the particular data and metrics will promote the capture of 

specific, standardized data points relevant to advancing the straight-through processing objective, 

which should enable more effective comparison and analysis of the data year over year and as 

between CMSPs.  While requiring specific data elements removes some of the CMSP’s discretion 

under the rule to determine how best to quantify advancements related to straight-through 

processing, the Commission believes that requiring the specific data elements in paragraph (b)(3) 

                                                 
390  For more information related to the content and filing of the initial and subsequent annual 

reports pursuant to adopted Rule 17Ad-27(c), see infra Part V.C.3. 

391  See DTCC ITP April Letter, supra note 216, at 12; DTCC ITP September Letter, supra 

note 325, at 2–3. 

392  See DTCC ITP September Letter, supra note 325, at 2–3. 



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is necessary to understand existing market dynamics and, as noted above, to facilitate comparisons 

across CMSPs and over time.   

Accordingly, the Commission is modifying the proposed annual report requirement to add 

a quantitative data requirement under paragraphs (b)(3)(i) through (v) specifying the key metrics 

related to the processing of securities transactions at CMSPs that are required in the annual 

report.393  Specifically, Rule 17Ad-27(b)(3) requires the CMSP to provide data that includes: (i) 

the total number of trades submitted to the clearing agency for processing; (ii) the total number of 

allocations submitted to the clearing agency; (iii) the total number of confirmations submitted to 

the clearing agency, as well as the total number of confirmations cancelled by users; (iv) the 

percentage of confirmations submitted to the clearing agency that are affirmed on trade date, 

specifying to the extent practicable the time of affirmation on trade date; (v) the percentage of 

allocations and confirmations submitted to the clearing agency that are matched and automatically 

confirmed through the clearing agency’s services; and (vi) metrics concerning the use of manual 

and automated processes by the CMSP’s users with respect to the CMSP’s services that may be 

used to assess progress in facilitating STP.  The data required under this provision should provide 

baseline information and insight into CMSP’s progress with regard to facilitating STP, CMSP user 

                                                 
393  In its initial comment letter, DTCC ITP recommended that the annual report should require 

the quantitative data in lieu of the policies and procedures and qualitative description requirements.  

See DTCC ITP April Letter, supra note 216, at 12.  DTCC ITP also recommended that the 

quantitative aspects of the report should include specified metric categories, in which DTCC ITP 

suggested specific types of data that should be included in those metric categories.  See DTCC ITP 

September Letter, supra note 325, at 2.  As discussed above, the Commission is opting to require 

specific data requirements under adopted Rule 17Ad-27(b), in lieu of metric categories.  See supra 

notes 391–392 and accompanying text.  Most of the data elements incorporated into Rule 17Ad-

27(b)(2) and (3) reflect the recommendations made by DTCC ITP.  See DTCC ITP September 

Letter, supra note 325, at 2–3. 



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performance, and potential indications of specific impediments in improving efficiencies in the 

post-trade processing environment.   

Although the metrics required under paragraphs (b)(3)(i) through (v) will provide a high-

level view of certain functions at the CMSP, the Commission believes this data will objectively 

demonstrate trends with regard to automation, manual intervention and overall progress towards 

STP and may provide indications of certain systemic or operational issues impeding the CMSP’s 

STP progress.  Defining the specific metrics required in the annual report should also have the 

effect of promoting consistencies across reporting periods at a single CMSP and across multiple 

CMSPs, which should in turn improve the Commission’s and the public’s ability to analyze the 

data over time.  The Commission considers the data requirements under paragraph (b)(3) to be the 

key information necessary to analyze the CMSP progress in facilitating STP.  In the event the 

CMSP determines that additional data is necessary or would be helpful to support its qualitative 

descriptions required under Rule 17Ad-27(b)(2) or (5), the Commission encourages the CMSP to 

include such additional quantitative data under paragraph (b)(3). 

With regard to metrics concerning the use of manual and automated processes by the 

CMSP’s users with respect to the CMSP’s services that are indications of progress in facilitating 

STP, as required under paragraph (b)(3)(vi), the Commission has not specified the type of metrics 

that should be used to comply with this provision of the new rule.  CMSPs are encouraged to 

design metrics specific to their services and users that would best indicate whether users are in fact 

using manual processes for allocations, confirmations or other processing activities and whether 

over time these users have migrated to an automated processing that replaced their use of manual 

processing.  For example, DTCC ITP cited to the use of SSI metrics as one such measure, which 

could provide details on the quality of SSIs established at the CMSP, the use of such SSIs by its 



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users in the actual processing stream, and automation of SSIs as possible indicators of STP 

improvements.394   

Given that the data required under paragraph (b)(3)(vi) is one of the core measurements 

central to the objective of Rule 17Ad-27, the Commission encourages CMSPs to design these 

metrics to be as expansive and granular as reasonably feasible, to better provide a detailed view of 

the STP progress, and to adjust such metrics as necessary to accommodate the onboarding of new 

services, technologies or operations.  Retaining sufficient continuity year-to-year in the CMSP’s 

metrics could ensure year-over-year measurability of the STP progress made during the time 

period covered by any particular annual report.  Any new metrics added to an annual report 

covering a particular twelve month period due to a change in the CMSP’s services, operations or 

systems could be discussed in the qualitative description required under new Rule 17Ad-27(b)(5).  

d) New Rule 17Ad-27(b)(4) – Quantitative Data Organization and 

Categorization 

The fourth component of the annual report requires the CMSP to submit, pursuant to Rule 

17Ad-27(b)(4), the data sets required by paragraph (b)(3) in the following manner:  (i) organized 

on a month-by-month basis beginning with January of each year, for the twelve months covered by 

the report required under paragraph (b) of the rule; (ii) separated, where applicable, between the 

use of central matching and electronic trade confirmation services offered by the clearing agency; 

(iii) separated, as appropriate, by asset class; (iv) separated by type of user; and (v) presented on an 

anonymized and aggregated basis.395   

                                                 
394  See DTCC ITP September Letter, supra note 325, at 3 for more detail on DTCC ITP’s 

comments related to data requirements in the annual report.   

395  To support transparency around the role and utility of CMSPs and objectively demonstrate 

trends toward more automation and STP progress, DTCC ITP recommended in its comment letter 



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The Commission agrees with DTCC ITP that further distinguishing any required data sets 

by asset class, type of CMSP service used, user type, and presented on an anonymized and 

aggregated basis, should better demonstrate automation trends and STP progress.  The 

Commission also believes that further subcategorizing the required data as now required under 

adopted Rule 17Ad-27(b)(4) enables more thorough and useful analysis of the progress toward 

STP and helps identify potential hindrances in achieving full STP.396  Organizing each of the data 

sets required under paragraph (b)(3) to further divide the data on a month-by month basis, and to 

identify the submission of trades by entity type (i.e., ETC versus matching), user type, and asset 

class should assist in the Commission’s and the public’s analysis of the data and more precise 

identification of any potential sources of issues hindering STP progress.  Moreover, the 

identification of certain subcategories should apprise users and their customers of any issues raised 

by the data that is specifically applicable to a particular user.   

The Commission understands that there may be circumstances when the identification of a 

particular data set does not lend itself to further subcategorization under paragraph (b)(4)(ii) 

requiring CMSP service type designation or paragraph (b)(4)(iii) requiring asset class designation.  

This may be particularly true as CMSPs services and technology evolve to accommodate 

improvements or changing business or market conditions.  For example, a CMSP’s ETC or 

matching service may not perform certain functions that are subject to the data set requirements 

                                                 

that the Commission amend proposed Rule 17Ad-27 to include a specific requirement for reporting 

quantitative data on an anonymized and aggregated level for rates of allocation, confirmation, 

affirmation, and/or matching that a CMSP has achieved via STP and distinguishing trade 

information by asset class, type of processing service (i.e., ETC versus matching), and “customer 

segment” (referred to as “user type” in Rule 17Ad-27, as adopted).  See DTCC ITP September 

Letter, supra note 325, at 2. 

396  See id. 



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under paragraph (b)(3).  Similarly, a specific CMSP function may involve multiple asset classes 

and, as a result, may be difficult to parse out in a manner that would aid an analysis of the 

information or aid in assessing STP progress.  In those cases, the CMSP generally should use 

reasonable efforts to organize the data sets in a manner that best informs the Commission, CMSP 

users, and the public as to the current and future status of the CMSP’s progress in facilitating STP 

at the CMSP. 

To the extent applicable and feasible, subcategorizing data required under paragraph (b)(3) 

by user type generally should include those entities that are directly interfacing with the CMSP to 

facilitate allocation, confirmation, affirmation or matching functions for themselves or their 

clients.  Such entities may include investment managers, broker-dealers (in their capacity as 

executing or prime broker-dealers), and custodians.  However, to the extent that other user types, 

including indirect users of CMSP services, can be identified and distinguished in the data sets 

required under paragraph (b)(3), the CMSP could consider including those categorizations as well 

if such information would benefit an analysis of the required data.   

The Commission is also adopting new Rule 17Ad-27(b)(4)(v) which requires the 

information to be presented on an anonymized and aggregated basis.397  Given that the annual 

report has information that the Commission believes should be available to the public, and that the 

Commission would likely sustain a confidential treatment request under 17 CFR 240.24b-2 by the 

CMSP for sensitive, proprietary and confidential data included in the annual report,398 the contents 

of the annual report need to be anonymized and aggregated.  

e) New Rule 17Ad-27(b)(5) – Qualitative Description of STP 

                                                 
397  See id.; see also DTCC ITP April Letter, supra note 216, at 12. 

398  See 17 CFR 240.24b-2. 



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Facilitation 

The fifth component of the annual report under Rule 17Ad-27(b) requires the CMSP to 

provide pursuant to new paragraph (b)(5) a description of the actions the CMSP intends to take to 

further facilitate STP of securities transactions at the clearing agency during the twelve-month 

period that follows the period covered by the report.  The Commission is adopting this provision 

generally as proposed, but is making one modification to the proposed rule text by replacing the 

text “[T]he steps” in proposed Rule 17Ad-27(c) with the text “a description of the actions” in new 

paragraph (b)(5).  This modification will facilitate a more detailed description of the CMSP’s 

actions to facilitate STP in the upcoming twelve months.   

The purpose of paragraph (b)(5) is two-fold.  First, the provision is intended to inform the 

Commission, CMSP users and market participants generally as to the CMSP’s intended actions to 

facilitate STP in the upcoming year.  The Commission anticipates that advance notice of a CMSP’s 

intentions to take certain actions oriented toward STP development may allow other market 

participants to make the necessary changes to accommodate the CMSP’s activities and may 

facilitate innovation to improve other aspects of the post-trade processing environment external to 

the CMSP, some of which may encourage or allow for future improvements at the CMSP. 

Second, new paragraph (b)(5) is intended to encourage CMSPs to develop a culture of 

focusing on enabling a fully automated STP environment as it considers future developments of its 

services, operations, and business model.  The Commission believes that the CMSP can and should 

be a leading force in encouraging the development of more efficient, automated, and STP-focused 

systems in post-trade processing market-wide.  While the CMSP does not have control over 

actions taken or services utilized by its users and their customers, the actions it takes to provide 

and promote STP services and capabilities at the CMSP level should have a direct impact on its 

users’ and an indirect impact on its users’ customers with respect to future developments of their 



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individual internal operations and systems, as well as an impact on the state of post-trade 

processing within the market as a whole.   

In describing the actions it intends to take in the twelve-month period following the period 

covered by the annual report as required under new Rule 17Ad-27(b)(5), the CMSP should 

generally consider including any material changes that it intends to make with respect to its 

policies, procedures, operations, systems or services that relate to the furtherance of facilitating 

STP.  While paragraph (b)(5) requires the CMSP to identify those actions the CMSP will in fact 

implement during the required timeframe, the CMSP should also consider including those actions 

that have a high degree of likelihood of being implemented during the timeframe.  To the extent 

practicable and related to STP development, the CMSP should also consider including a summary 

of the underlying rationale as to why the CMSP intends to take a particular action required to be 

described under paragraph (b)(5) and a description of the expected impact of any such action or 

actions as it relates to the CMSP’s facilitation of STP. 

The Commission anticipates that the metrics required under new Rule 17Ad-27(b)(3) 

should help inform the CMSP and shape future considerations by providing data that evidences 

whether progress has made in moving toward full STP during the period covered by the preceding 

year and what if any obstacles remain that should be analyzed and addressed in future iterations of 

its services and operations.  For example, changes in manual touch rates by user type may indicate 

issues that can and should generally be addressed on a policy or systems basis to reduce those 

rates.  From a qualitative perspective, CMSPs should consider reviewing their operations on a 

system-wide basis to design future solutions to address the use of manual processes or automated 

process that result in manual intervention, with the goal of reducing or eliminating the use of such 

processes. 



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3. New Rule 17Ad-27(c) – Timing of Filing Annual Report 

The Commission is adopting new Rule 17Ad-27(c) to require that the annual report 

required under Rule 17Ad-27(b) must be filed with the Commission within 60 days of the end of 

the twelve-month period covered by the report, and the twelve month period covered by each 

report must commence on January 1 of the calendar year.399  The Commission believes that 

requiring the filing of the annual report within 60 days of the end of the twelve month period 

covered by the report is an appropriate amount of time because it balances the competing interests 

of providing the CMSPs sufficient time to compile the data and descriptions required under new 

Rule 17Ad-27(b) and providing sufficiently recent and relevant data for the Commission and 

public review and analysis.  Moreover, CMSPs may choose to plan and compile the contents of the 

annual report throughout the reporting year as new relevant data and information becomes 

available, in part because the CMSPs already provide on a monthly basis some data contemplated 

in the annual report pursuant to the terms of the exemptive orders.  Based on the Commission’s 

experience in requiring other types of clearing agencies to provide financial statements within sixty 

days of the end of the year,400 the Commission believes a 60-day period would provide the CMSP 

                                                 
399  DTCC ITP recommended that the Commission should provide further clarification as to 

when CMSPs would be required to submit their initial annual report to the Commission, as well as 

the time period applicable to the actual content to be included in initial annual report.  DTCC ITP 

raised concerns that depending on when the initial report was due, the variance in pre and post T+1 

implementation data could result in unclear analysis of STP progress.  See DTCC ITP September 

Letter, supra note 325, at 3.  The Commission believes DTCC ITP’s concern is addressed, 

regardless of the time period covered by the initial or subsequent annual reports or whether the 

data reflects pre or post T+1 implementation, because the data will be presented on a month-by-

month basis pursuant to new Rule 17Ad-27(b)(4)(i), and therefore amenable to an analysis on any 

timeframe. 

400  See, e.g., 17 CFR 240.17Ad-22(c)(2).  In the post-trade environment more generally, the 

Commission also requires security-based swap data repositories to file an annual report with the 

Commission within sixty days of the end of the fiscal year.  See 17 CFR 240.13n-11. 



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sufficient time to compile and complete the remaining portions of the report and seek the 

appropriate internal approval to file the report with the Commission. 

The Commission is also requiring that the time period covered by the annual report contain 

information relevant to the requirements under new paragraph (b) of Rule 17Ad-27 from January 1 

through December 31 of each calendar year.  By synchronizing the submission the annual reports 

to a uniform time frame across all CMSPs, the Commission, CMSP users, and the public will be 

able to better analyze the data and assess compliance with the rule and progress of the CMSPs, on 

an individual CMSP level and across all CMSPs, in facilitating STP.  In the event there is a partial 

year on the first year a CMSP is obligated to comply with Rule 17Ad-27(b), then the CMSP should 

generally file its first annual report to cover that partial year through December 31 of that year.401   

4. New Rule 17Ad-27(d) - Filing Annual Report in EDGAR and 

Confidentiality Issues 

The Commission is adopting as proposed the provision under proposed Rule 17Ad-27 that 

requires CMSPs to file the annual report on EDGAR.402  Pursuant to new Rule 17Ad-27(d), a 

CMSP is required to submit its annual report to the Commission using EDGAR, and tag the 

information in the report using the structured (i.e., machine-readable) Inline XBRL data language.  

Specifically, Rule 17Ad-27(d) requires that the report required under paragraph (b) of the new rule 

                                                 
401  For example, the compliance date for adopted Rule 17Ad-27 is May 28, 2024.  See infra 

Part VII.D.  The first annual report will cover the time period from April 1, 2024, through 

December 31, 2024. 

402  DTCC ITP did not comment on the use of EDGAR to file the proposed annual report, but 

did mention in the context of filing on EDGAR that it was considering publishing the annual report 

on its website.  See DTCC ITP September Letter, supra note 325, at 3.   



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be filed electronically on EDGAR and must be provided as interactive data as required by 17 CFR 

232.405 (“Rule 405 of Regulation S-T”) in accordance with the EDGAR Filer Manual.403   

Using EDGAR will provide the Commission and the public with a centralized, publicly 

accessible electronic database for the reports, facilitating the use of the reported data on straight-

through processing.  Moreover, requiring Inline XBRL tagging of the reported disclosures, which 

would specifically include an Inline XBRL block text tag for each of the required narrative 

disclosures as well as detail tags for individual data points, should make the disclosures more 

easily available and accessible to and reusable by market participants and the Commission for 

retrieval, aggregation, and comparison across time periods for a single CMSP or across different 

CMSPs and time periods.404  Detail tags will also be helpful relative to the disclosure in the annual 

report of individual data points, including the rates of allocation, confirmation, affirmation, and/or 

matching achieved via straight-through processing.  As a general matter, incorporating submission 

via EDGAR and requiring Inline XBRL tagging under Rule 17Ad-27 will facilitate access to data 

included in reports submitted pursuant to the rule in a manner that is machine-readable, human-

                                                 
403  See 17 CFR 232.101 and 232.405.  In a non-substantive change from the proposal, rather 

than adding new 17 CFR 232.409 (“Rule 409 of Regulation S-T”), the Commission is expanding 

Rule 405 of Regulation S-T to effectuate the Inline XBRL requirement.  This approach will be 

consistent with other Commission rulemakings that have featured Inline XBRL requirements.  See, 

e.g., Exchange Act Release No. 95607 (Aug. 25, 2022), 87 FR 55134, 55196 (Sept. 8, 2022). 

404  See Exchange Act Release No. 10514 (June 28, 2018), 83 FR 40846, 40847 (Aug. 16, 

2018).  Inline XBRL allows filers to embed XBRL data directly into an HTML document, 

eliminating the need to tag a copy of the information in a separate XBRL exhibit.  Id. at 40851.  

Using Inline XBRL as compared to an unstructured PDF, HTML, or ASCII format requirement for 

the reports would facilitate analysis of the information contained therein.  Id.  With respect to the 

metrics concerning the use of manual and automated processes by a CMSP’s users required under 

paragraph (b)(3)(vi)—which may vary across CMSPs—the Commission anticipates that the tagged 

data will facilitate useful comparisons over time at a particular CMSP, even though it may 

facilitate only limited comparisons across CMSPs.  



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readable, and accessible via application programming interface where appropriate.405  In the 

Commission’s view, the Inline XBRL tagging requirement will facilitate efficient analysis of 

information that CMSPs include in their annual reports, providing CMSP users (e.g., institutional 

investors and broker-dealers acting on behalf of institutional investors) and the general public 

greater insight into policies and procedures, progress, quantitative data, and qualitative 

descriptions related to straight-through processing. 

As discussed in the T+1 Proposing Release, the Commission will make the annual report 

required under adopted Rule 17Ad-27(b) publicly available on its website to enable the public to 

                                                 
405  These considerations are consistent with objectives of the recently enacted Financial Data 

Transparency Act (“FDTA”), which concerns the manner in which the Commission collects and 

disseminates information.  The FDTA was signed into law on December 23, 2022, as Title LVIII 

of the James M. Inhofe National Defense Authorization Act for Fiscal Year 2023.  See James M. 

Inhofe National Defense Authorization Act for Fiscal Year 2023, Pub. L. 117-263 (Dec. 23, 

2022).Pub. L. 117-263, 136 Stat. 2395 (2022).  Section 5811 of the FDTA directs the Commission 

and other covered agencies (e.g., financial regulators) to jointly issue proposed rules for public 

comment that establish data standards for the collections of information reported to each covered 

agency by financial entities and for the data collected from covered agencies on behalf of the 

Financial Stability Oversight Council.  The data standards must meet specified criteria relating to 

openness and machine-readability and promote interoperability of financial regulatory data across 

members of the Financial Stability Oversight Council.  In addition, section 5822 of the Financial 

Data Transparency Act requires that all public data assets published by the Commission under the 

securities laws and the Dodd-Frank Act be made available in accordance with specified criteria 

relating to openness and machine-readability.  Section 5811 of the FDTA directs the Commission 

and other covered agencies (e.g., financial regulators) to jointly issue proposed rules for public 

comment that establish data standards for the collections of information reported to each covered 

agency by financial entities and for the data collected from covered agencies on behalf of the 

Financial Stability Oversight Council.  The data standards must meet specified criteria relating to 

openness and machine-readability and promote interoperability of financial regulatory data across 

members of the Financial Stability Oversight Council.  In addition, section 5822 of the Financial 

Data Transparency Act requires that all public data assets published by the Commission under the 

securities laws and the Dodd-Frank Act be made available in accordance with specified criteria 

relating to openness and machine-readability.  See 44 U.S.C. 3502(20) (defining the term “open 

Government data asset” to mean, among other things, machine-readable and available (or could be 

made available) in an open format). 



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review and analyze data regarding, and progress towards, straight-through processing.406  The 

public availability of the annual report would help inform the public, particularly the direct and 

indirect users of CMSPs, as to the progress being made each year to advance implementation of 

STP with respect to the allocation, confirmation, affirmation, and matching of institutional trades, 

the communication of messages among the parties to the transactions, and the availability of 

service offerings that reduce or eliminate the need for manual processing.  In addition, allowing for 

additional transparency may facilitate innovation in the public forum as to how CMSPs may 

improve their systems and services to improve STP specifically, and the institutional processing 

environment generally.  

The Commission does not believe the annual report requires the inclusion of proprietary 

information, trade secrets, or personally identifiable information.  To the extent that an annual 

report includes confidential commercial or financial information, a CMSP could request 

confidential treatment of those specific portions of the report.407 

VI. Impact on Certain Commission Rules, Guidance, and SRO Rules 

The Commission stated in the T+1 Proposing Release that the proposed rules and rule 

amendments may affect compliance with other existing Commission rules and guidance that 

reference the settlement cycle or settlement processes.  The Commission identified a preliminary 

list of rules that could be affected by a move to a T+1 standard settlement cycle, determined that 

changes to those rules were not necessary, and solicited comment regarding the potential impact of 

                                                 
406  DTCC ITP has indicated that it is considering publishing the report on its website, where it 

believes that the public will have ready access to the information.  See DTCC ITP September 

Letter, supra note 325, at 3. 

407  See 17 CFR 240.24b-2. 



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a T+1 settlement cycle.  In response, several commenters identified elements of Commission rules, 

as well as existing Commission guidance, exemptive relief related to those rules, and staff no-

action letters,408 that may be impacted by shortening the standard settlement cycle to T+1. 

A. Regulation SHO 

In the T+1 Proposing Release, the Commission identified provisions of Regulation SHO 

under the Exchange Act that may be impacted by the adoption of a T+1 standard settlement cycle.  

Certain provisions of Regulation SHO use “trade date” and “settlement date” to determine the time 

frames for compliance relating to sales of equity securities and fails to deliver on settlement date.  

These references are not to a particular settlement cycle (e.g., T+2); however, the time frames for 

these provisions can change in tandem with changes in the standard settlement cycle.409  The 

Commission received the following comments regarding Regulation SHO.   

One commenter stated its belief that the Commission should reevaluate the deadlines under 

Rule 204 in the context of a T+1 settlement cycle.410  The commenter expressed concern that 

moving to T+1 would reduce the time available for a bona fide market maker411 to close out fail-

to-deliver positions and could adversely impact the liquidity role those market makers provide.   

                                                 
408  Staff reports, Investor Bulletins, and other staff documents (including those cited herein) 

represent the views of Commission staff and are not a rule, regulation, or statement of the 

Commission.  The Commission has neither approved nor disapproved the content of these staff 

documents and, like all staff statements, they have no legal force or effect, do not alter or amend 

applicable law, and create no new or additional obligations for any person. 

409  See T+1 Proposing Release, supra note 2, at 10444 (discussing the potential impacts of a 

T+1 standard settlement cycle on the closeout of a fail-to-deliver position under 17 CFR 242.204 

(“Rule 204”) and the application of 17 CFR 242.200(g) (“Rule 200(g)”)). 

410  See Virtu Financial Letter, supra note 16, at 3. 

411  Under Regulation SHO’s bona fide market making exceptions, the broker-dealer generally 

should be holding itself out as standing ready and willing to buy and sell the security by 



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As discussed in the T+1 Proposing Release,412 shortening the standard settlement cycle to 

T+1 would reduce the time frames to effect the closeout of most types of fail-to-deliver positions 

under Rule 204.413  The applicable closeout date for a fail-to-deliver position can differ depending 

on its Rule 204 categorization, including whether it results from a short sale, a long sale, or bona 

fide market making activity.  If a fail-to-deliver position results from bona fide market making 

activity, the participant must close out the fail-to-deliver position by no later than the beginning of 

regular trading hours on the third consecutive settlement day following the settlement date.  Under 

the current T+2 standard settlement cycle, the closeout for long sales or bona fide market making 

activity is required by the beginning of regular trading hours on T+5.  If the Commission adopts a 

T+1 standard settlement cycle, this closeout requirement would be shortened from T+5 to T+4.   

                                                 

continuously posting widely accessible quotes that are near or at the market.  The market maker 

must be at economic risk for such quotes.  See Exchange Act Release No. 58775 (Oct. 14, 2008), 

73 FR 61690, 61699 (Oct. 17, 2008) (“2008 Regulation SHO Amendments”); see also Exchange 

Act Release No. 94524 (Mar. 28, 2022), 87 FR 23054, 23068 n.157 (Apr. 18, 2022) (“Dealer 

Release”) (“Broker-dealers that do not publish continuous quotations, or publish quotations that do 

not subject the broker-dealer to such risk (e.g., quotations that are not publicly accessible, are not 

near or at the market, or are skewed directionally towards one side of the market) would not be 

eligible for the bona-fide market-maker exceptions under Regulation SHO.  In addition, broker-

dealers that publish quotations but fill orders at different prices than those quoted would not be 

engaged in bona-fide market making for purposes of Regulation SHO.”).  Thus, a market-maker 

that continually executed short sales away from its posted quotes would generally be unable to rely 

on the bona-fide market making exceptions of Regulation SHO.  See Exchange Act Release No. 

50103 (July 28, 2004), 69 FR 48008, 48015 n.68 (Aug. 6, 2004).  Further, broker-dealers that 

publish quotations but fill orders at different prices than those quoted would not be engaged in 

bona fide market-making for purposes of Regulation SHO.  See, e.g., Dealer Release, supra note 

411, at 23068 n.157.  The market-maker must also be engaged in bona fide market making in that 

security at the time of the short sale for eligibility for the exceptions.  See 2008 Regulation SHO 

Amendments, supra note 411, at 61699. 

412  See T+1 Proposing Release, supra note 2, at 10461. 

413  A T+1 standard settlement cycle would reduce close out time frames for all Rule 204 fail-

to-deliver positions except those that fall within Rule 204(a)(2). 



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As explained above, most Rule 204 time frames automatically adjust to a new shortened 

settlement cycle, and the impact of such an alignment was considered during the rulemaking 

process for Rule 204 as well as during the proposal of the T+1 cycle.  Accordingly, given the time 

available to comply under a T+1 standard settlement cycle, the Commission does not believe that a 

reevaluation of the Rule 204 time frames is necessary at this time.414 

Two commenters addressed the impact of a T+1 settlement cycle to the application of Rule 

200(g)(1) as it pertains to loaned but recalled securities.  One commenter stated that the move to 

T+1 will shorten the recall period by one day and recommended that the Commission modify its 

interpretation in the Regulation SHO Adopting Release regarding the recall period to reflect this 

                                                 
414  As discussed in the T+1 Proposing Release, the time frame to recall a loaned security 

corresponds to the then current standard settlement cycle.  As the standard settlement cycle has 

been modified from T+3 to T+2 to T+1, the Commission has provided additional guidance 

regarding the probable time frame necessary to recall a loaned security so as to ensure timely 

delivery to close out a failure to deliver that may have occurred.  Extending the time frame to 

recall a loaned security further could result in failures to deliver not being closed out as is required 

by Rule 204 of Regulation SHO.  See T+1 Proposing Release, supra note 2, at 10461-62 (stating 

that previous guidance “was predicated on the Commission’s belief that, under then current 

industry standards, recalls for loaned securities would likely be delivered within three business 

days after the initiation of a recall.  In that case, a broker-dealer that initiated a bona fide recall by 

T+2 would receive delivery of loaned securities by T+5 and then be able to close out any failure to 

deliver on a “long” sale of the loaned but recalled securities by the beginning of regular trading 

hours on T+6, as then required by Rule 204 in a T+3 environment.”); see also T+2 Adopting 

Release, supra note 4, at 15578 (stating that “to the extent that customers have not made timely 

deliveries and have caused a fail to deliver by a broker-dealer, any indirect impacts on such 

customers are warranted,” and expressing specific concerns related to continued failures to deliver 

further: “In the Rule 204 Adopting Release, the Commission recognized that requiring broker-

dealers to close-out fails to deliver promptly after they occur may result in costs to certain 

participants, but believed that ‘such costs are limited and are justified by the fact that the rule will 

continue our efforts to achieve our goals of reducing fails to deliver by maintaining the reductions 

in fails to deliver achieved by the adoption of temporary Rule 204T, as well as other actions taken 

by the Commission, and addressing potentially abusive ‘naked’ short selling and, thereby help 

restore, maintain, and enhance investor confidence in the markets.’”). 



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shortened period.415  The other commenter stated that if the standard settlement cycle is shortened 

to T+1, the requirements under Rule 200(g) may result in a change in the timing by which a 

broker-dealer would need to initiate a bona fide recall of a loaned security to mark the sale of such 

loaned, but recalled, security “long” for purposes of Rule 200(g)(1).416  The commenter observed 

that some broker-dealers may have shortened the previous three business day recall period to two 

business days under the T+2 standard settlement cycle to ensure settlement on the proper 

settlement date.  The commenter explained that, in a T+1 environment, the recall period would be 

even shorter, which may limit securities lending participants’ ability to comply with these rules. 

The commenter recommended that, should the implementation of T+1 result in any changes to 

Regulation SHO, the Commission’s guidance regarding classification of the sale of a security that 

is on loan as “long” remain unchanged. 

In the T+1 Proposing Release, the Commission discussed the close-out scenarios under 

Regulation SHO in a T+1 environment and provided a figure to illustrate the timing.417  To satisfy 

the requirements of Rule 200(g), it was acknowledged that some broker-dealers may need to 

initiate a bona fide recall as early as trade date or may choose to modify securities lending 

agreements to shorten the recall period.  Such measures would need to be taken to meet the timing 

obligations under a T+1 cycle, and the Commission believes that such measures could facilitate the 

fulfillment of timing obligations without changing the requirements of Regulation SHO or related 

                                                 
415  See Fidelity Letter, supra note 16, at 7 (further explaining, “[w]hile we anticipate that in 

the early days of the transition to T+1, there may be an increase in fails to deliver, we believe that 

the Commission’s already robust regulatory framework minimizes instances in which a market 

participant may fail to deliver a security.”). 

416  See RMA Letter, supra note 16, at 4–5. 

417  See T+1 Proposing Release, supra note 2, at 10462. 



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guidance.  The industry used such measures to make a similar successful adjustment in the prior 

shortening of the settlement cycle from T+3 to T+2, and the Commission believes that such 

measures could again ensure compliance in a T+1 environment.  The Commission will continue to 

monitor the impact of a T+1 settlement cycle on the ability of broker-dealers to comply with Rule 

200(g). 

B. Delivery of Rule 10b-10 Confirmations and Prospectuses 

As discussed in the T+1 Proposing Release,418 Rule 10b-10 under the Exchange Act 

provides customers confirmations of transactions and serves a significant investor protection 

function.419  Rule 10b-10 does not directly refer to the settlement cycle,420 but instead requires that 

a broker-dealer “gives or sends” a customer a written confirmation disclosing specified 

information at or before “completion of the transaction.”421  

The Commission has considered how and when broker-dealers typically comply with the 

requirement to send out a Rule 10b-10 confirmation when changes have been made to the standard 

                                                 
418  See id. at 10463. 

419  17 CFR 240.10b-10. 

420   Rule 10b-10 was adopted in 1977 before the Commission adopted Rule 15c6-1, 

establishing the standard settlement cycle of T+3 in 1993.  See Exchange Act Release No. 13508 

(May 5, 1977), 42 FR 25318 (May 17, 1977). 

421  Generally, 17 CFR 240.15c1-1 (“Rule 15c1-1”) defines “completion of the transaction” to 

mean the time when: (i) a customer purchasing a security pays for any part of the purchase price 

after payment is requested or notification is given that payment is due; (ii) a security is delivered or 

transferred to a customer who purchases and makes payment for it before payment is requested or 

notification is given that payment is due; (iii) a security is delivered or transferred to a broker-

dealer from a customer who sells the security and delivers it to the broker-dealer after delivery is 

requested or notification is given that delivery is due; or (iv) a broker-dealer makes payment to a 

customer who sells a security and delivers it to the broker-dealer before delivery is requested or 

notification is given that delivery is due.  See 17 CFR 240.15c1-1(b).Conformed to Federal Register version 

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settlement cycle.  In 1993, when Rule 15c6-1 was initially adopted, the Commission was aware 

that broker-dealers typically sent out Rule 10b-10 customer confirmations on the day after trade 

date.422  By 2017, when the Commission shortened the standard settlement cycle from T+3 to T+2, 

the Commission had established a framework for electronic delivery of required information to 

investors.423  At that time, the Commission stated that, while broker-dealers may continue to send 

physical customer confirmations on the day after the trade date, broker-dealers may also send 

electronic confirmations to customers on the trade date.  The Commission also acknowledged that, 

in a T+2 settlement cycle, broker-dealers would have a shorter timeframe to send out the 

confirmation but did not believe that a shortened settlement cycle would create problems with 

regards to a broker-dealer’s ability to comply with Rule 10b-10.  When proposing T+1, the 

Commission expressed a similar belief that T+1 would not create a compliance issue for broker-

dealers under Rule 10b-10, although broker-dealers would again need to accommodate the 

shortened timeframes of T+1.424  The Commission solicited comment on the extent to which the 

T+1 rule proposals may impact compliance with Rule 10b-10. 

One commenter stated that broker-dealers have had challenges at times meeting the Rule 

10b-10 requirements under T+2, particularly for postal delivery such as in March 2020 at the 

beginning of the Covid-19 pandemic, and that the proposed compressed timeframe of T+1 will 

                                                 
422  See T+1 Proposing Release, supra note 2, at 10463. 

423  See, e.g., Exchange Act Release No. 37182 (May 9, 1996), 61 FR 24644 (May 15, 1996) 

(providing Commission views on electronic delivery of required information by broker-dealers, 

transfer agents, and investment advisers); see also T+1 Proposing Release, supra note 2, at 10643 

n.222. 

424  See T+1 Proposing Release, supra note 2, at 10463. 



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leave broker-dealers with even less time to correct minor delivery issues.425 Another commenter 

responded that shortening the settlement cycle to T+1 will make the delivery of physical 

confirmations no longer practical or feasible.426  However, as noted above, Rule 10b-10 requires 

that a broker-dealer “give or send” the confirmation prior to settlement; it does not require that the 

Rule 10b-10 confirmation be received prior to settlement.  Shortening the settlement cycle does not 

affect the ability of the broker-dealer to give or send Rule 10b-10 confirmations, and therefore 

does not impact a broker-dealer’s ability to comply with Rule 10b-10.  Accordingly, the 

Commission believes it is unnecessary to modify Rule 10b-10 to facilitate an effective transition to 

a T+1 standard settlement cycle.  In addition, to the extent that a broker-dealer and its customer 

would like to ensure that the customer receives Rule 10b-10 confirmation documents prior to 

settlement, as explained above and discussed further below, broker-dealers and their customers 

have the option to establish an arrangement for electronic delivery.  

The Commission requested comment on whether guidance regarding “delivery” for 

electronic confirmations under Rule 10b-10 needed to be updated to facilitate a T+1 standard 

settlement cycle.427  In the context of sending Rule 10b-10 confirmations and prospectus delivery 

obligations (discussed further below in Part VI.C), several commenters asked that the Commission 

consider, on a wider basis, making electronic delivery (“e-delivery”) the default method for 

                                                 
425  See letter from Kenneth E. Bentsen, Jr., President and Chief Executive Officer, Securities 

Industry and Financial Markets Association (Aug. 3, 2022), at 2 (“SIFMA August 3rd Letter”). 

426  See AGC April Letter, supra note 16, at 3. 

427  See T+1 Proposing Release, supra note 2, at 10463 n.222. 



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communicating with investors or customers.428   The Commission observes that broker-dealers 

already may use “e-delivery” to provide this information to investors.429  The Commission believes 

that considering widespread changes to e-delivery standards is not appropriate in the context of 

shortening the settlement cycle because it is not necessary to establish an e-delivery default to 

shorten the standard settlement cycle to T+1.  In a T+1 environment, no Commission rule would 

require the delivery of paper documentation by mail on T+1.  Moreover, the issues associated with 

e-delivery are complex and multi-faceted, affecting a wide range of disclosure documents, and 

imposing a range of potential impacts on investors who currently receive physical documents.430  

The Commission believes considering changes to existing guidance warrants further consideration.  

Accordingly, the Commission declines to make such change to the existing guidance in this 

rulemaking. 

One commenter sought assurance that moving to T+1 would not affect existing no-action 

letters and exemptive relief under Rule 10b-10 for dividend reinvestment programs (“DRIP”) that 

                                                 
428  See SIFMA August 3rd Letter, supra note 425, at 1 (stating that this acceleration of the 

settlement cycle heightens the need for the Commission to modernize its rules to make e-delivery 

the default mechanism for transmitting investor communications and disclosures); ICI Letter, 

supra note 16, at 11–12 (recommending that e-delivery should be the default method for delivering 

Rule 10b-10 confirmations); ASA Letter, supra note 16, at 3 (stating that, given the growing 

preferences of investors to receive such documentation electronically, it would be cost-effective 

and in the best interest of investors to allow e-delivery to be the default option for sending 

prospectuses and trade confirmations, adding that investors who wish to receive paper documents 

would still be afforded the ability to opt-in to receive paper). 

429  See T+1 Proposing Release, supra note 2, at 10463 n.222. 

430  Among other things, considering a transition to e-delivery by default would need to assess 

the implication of such a change with regard to the timing, format, and delivery mechanism, and 

those implications may differ among different types of documents, depending on the nature and 

purpose of the document. Another issue to consider would be how e-delivery by default would 

affect investor engagement with important information. 



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allow monthly account statements for trade activity.431  The Commission observes that a shorter 

settlement cycle would not change the relevant facts and circumstances described in the applicable 

staff no-action letters or exemptive relief regarding the application of Rule 10b-10 to DRIP 

transactions. 

C. Other Prospectus Delivery Matters 

As stated in the T+1 Proposing Release,432 broker-dealers have to comply with prospectus 

delivery obligations under the Securities Act.433  The regulations at 17 CFR 230.172 (“Securities 

Act Rule 172”) implement an “access equals delivery” model that permits, with certain exceptions, 

final prospectus delivery obligations to be satisfied by the filing of a final prospectus with the 

Commission, rather than delivery of the prospectus to purchasers.434  The Commission stated its 

preliminarily belief that a T+1 standard settlement cycle would not raise any significant legal or 

operational concerns for issuers or broker-dealers to comply with the prospectus delivery 

                                                 
431  SIFMA April Letter, supra note 16, at 15. 

432  T+1 Proposing Release, supra note 2, at 10464. 

433  15 U.S.C. 77a et seq.  Section 5(b)(2) of the Securities Act makes it unlawful to deliver 

(i.e., as part of settlement) a security “unless accompanied or preceded” by a prospectus that meets 

the requirements of section 10(a) of the Securities Act (known as a “final prospectus”).  15 U.S.C. 

77e(b)(2). 

434  15 U.S.C. 77e(b)(2).  Under Securities Act Rule 172(b), an obligation under section 5(b)(2) 

of the Securities Act to have a prospectus that satisfies the requirements of section 10(a) of the 

Securities Act precede or accompany the delivery of a security in a registered offering is satisfied 

only if the conditions specified in paragraph (c) of Rule 172 are met.  17 CFR 230.172(b).  

Pursuant to Rule 172(d), “access equals delivery” generally is not available to the offerings of 

most registered investment companies (e.g., mutual funds), business combination transactions, or 

offerings registered on Form S–8.  17 CFR 230.172(d).  The Commission recently amended Rule 

172 to allow registered closed-end funds and business development companies to rely on the rule.  

See Securities Offering Reform for Closed-End Investment Companies, Investment Company Act 

Release No. 33836 (Apr. 8, 2020), 85 FR 33353 (June 1, 2020). 



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obligations under the Securities Act.435  The Commission also requested comment on the 

following: (i) whether any specific legal or operational concerns would arise for issuers or broker-

dealers to comply with the prospectus delivery obligations under the Securities Act if the 

settlement cycle is shortened to T+1, and (ii) the extent to which the T+1 rule proposals may 

impact compliance with the prospectus delivery requirements under the Securities Act. 

One commenter stated that the requirements of 17 CFR 240.15c2-8(b) should not apply in a 

T+1 environment.436  Under Exchange Act Rule 15c2-8(b), with respect to an issue of securities 

where the issuer has not been previously required to file reports pursuant to section 13(a) or 15(d) 

of the Exchange Act,437 unless the issuer has been exempted from the requirement to file reports 

thereunder pursuant to section 12(h) of the Exchange Act,438 a broker-dealer is required to deliver 

a copy of the preliminary prospectus to any person who is expected to receive a confirmation of 

sale at least 48 hours prior to the sending of such confirmation (“48-hour preliminary prospectus 

delivery requirement”).439  The commenter stated that in a T+1 settlement cycle, many broker-

dealers will send confirmations on trade date to achieve settlement by T+1, and that Rule 15c2-8 

does not reflect present-day offering procedure timelines, public availability of preliminary 

prospectuses on EDGAR, or electronic delivery facilities.440  However, because the Commission is 

                                                 
435  T+1 Proposing Release, supra note 2, at 10464. 

436  SIFMA April Letter, supra note 16, at 13–14. 

437  15 U.S.C. 78m(a); 15 U.S.C. 78o(d). 

438  15 U.S.C. 78l(h). 

439  Exchange Act Rule 15c2-8(b). 

440  SIFMA April Letter, supra note 16, at 14. 



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adopting a T+2 standard settlement cycle for firm commitment offerings priced after 4:30 p.m. ET, 

and not a T+1 standard settlement cycle for these offerings, in final Rule 15c6-1(c),441 no 

inconsistency exists between the requirements set forth in the final amendments to Rule 15c6-1 

and existing Rule 15c2-8(b).  Accordingly, the Commission does not believe that Rule 15c2-8 

should be modified. 

D. Financial Responsibility Rules for Broker-Dealers 

As noted in the T+1 Proposing Release, certain provisions of the broker-dealer financial 

responsibility rules under the Exchange Act442 reference explicitly or implicitly the settlement date 

of a securities transaction.443  For example, paragraph (m) of 17 CFR 240.15c3-3 references the 

settlement date to prescribe the timeframe in which a broker-dealer must complete certain sell 

orders on behalf of customers.444  Specifically, Rule 15c3-3(m) provides that if a broker-dealer 

executes a sell order of a customer (other than an order to execute a sale of securities which the 

seller does not own) and if for any reason the broker-dealer has not obtained possession of the 

securities from the customer within ten business days after the settlement date, the broker-dealer 

must immediately close the transaction with the customer by purchasing securities of like kind and 

                                                 
441  See supra Part II.C.4. 

442  For purposes of this release, the term “financial responsibility rules” includes any rule 

adopted by the Commission pursuant to sections 8, 15(c)(3), 17(a) or 17(e)(1)(A) of the Exchange 

Act, any rule adopted by the Commission relating to hypothecation or lending of customer 

securities, or any rule adopted by the Commission relating to the protection of funds or securities.  

The Commission’s broker-dealer financial responsibility rules include 17 CFR 240.15c3-1, 

240.15c3-3, 240.17a-3, 240.17a-4, 240.17a-5, 240.17a-11, and 240.17a-13. 

443  See T+1 Proposing Release, supra note 2, at 10462–63. 

444  Exchange Act Rule 15c3-3(m). 



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quantity.445  In addition, settlement date is incorporated into paragraph (c)(9) of 17 CFR 240.15c3-

1,446 defining what it means to “promptly transmit” funds and “promptly deliver” securities within 

the meaning of paragraphs (a)(2)(i) and (v) of Rule 15c3-1.447  The concepts of promptly 

transmitting funds and promptly delivering securities are incorporated in other provisions of the 

financial responsibility rules as well, including paragraphs (k)(1)(iii) and (k)(2)(i) and (ii) of Rule 

15c3-3,448 paragraph (e)(1)(A) of 17 CFR 240.17a-5,449 and paragraph (a)(3) of 17 CFR 240.17a-

13.450 

The Commission requested comment regarding the potential impact that shortening the 

standard settlement cycle from T+2 to T+1 may have on the ability of broker-dealers to comply 

with the financial responsibility rules.  The Commission received one comment stating that 

shortening the standard settlement cycle to T+1 would reduce the number of days available to a 

broker-dealer to obtain possession or control of customer securities before being required to close 

out a customer transaction under Rule 15c3-3(m).451  The commenter indicated that it did not 

                                                 
445  However, paragraph (m) of Rule 15c3-3 provides that the term “customer” for the purpose 

of paragraph (m) does not include a broker or dealer who maintains an omnibus credit account 

with another broker or dealer in compliance with 12 CFR 220.7(f) (Rule 7(f) of Regulation T). 

446  Exchange Act Rule 15c3-1(c)(9). 

447  17 CFR 240.15c3-1(a)(2)(i) and (v). 

448  17 CFR 240.15c3-3(k)(1)(iii), (k)(2)(i)–(ii). 

449  Rule 17a-5(e)(1)(i)(A). 

450  Rule 17a-13(a)(3). 

451  See Fidelity Letter, supra note 16, at 7. 



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believe T+1 would materially burden broker-dealers or their customers and did not recommend 

changes to the rule.452 

The commenter also recommended that the Commission revisit Rule 15c3-3(d).453  Under 

Rule 15c3-3(d), not later than the next business day, a broker or dealer, as of the close of the 

preceding business day, must determine from its books or records the quantity of fully paid 

securities and excess margin securities in its possession or control and the quantity of fully paid 

securities and excess margin securities not in its possession or control.454  According to the 

commenter, existing interpretative guidance allows a firm to release securities a day prior to 

settlement, under certain conditions.  The commenter said that it is not clear what this guidance 

means in a T+1 environment.  The commenter offers an example: if segregation of customer assets 

is based on an end of day market value and end of day cash settled, it is not clear how the 

segregation of assets should be calculated and enforced in a T+1 environment.455  The commenter 

requested that the Commission work with broker-dealers to better understand the timeframes 

involved in the segregation process and how they can operate in a T+1 environment.  The 

Commission expects that the staff will continue to monitor the impact of a T+1 settlement cycle on 

this rule. 

                                                 
452  Id. at 7–8. 

453  Id. at 8. 

454  17 CFR 240.15c3-3(d)(1). 

455  See Fidelity Letter, supra note 16, at 8. 



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E. Changes to SRO Rules and Operations 

In the T+1 Proposing Release, the Commission stated that, as with the T+2 transition, it 

anticipated that the proposed transition to T+1 would require changes to SRO rules and operations 

to achieve consistency with a T+1 standard settlement cycle.456  Certain SRO rules reference 

existing Rule 15c6-1 or currently define “regular way” settlement as occurring on T+2 and, as 

such, may need to be amended in connection with shortening the standard settlement cycle to 

T+1.457  Certain timeframes or deadlines in SRO rules also may refer to the settlement date, either 

expressly or indirectly.  In such cases, the SROs may need to amend these rules in connection with 

shortening the settlement cycle to T+1.458  

In addition, the Commission also stated that SRO rules and operations may be affected to a 

greater extent than occurred during the T+2 transition, in part because the Commission has 

proposed more rule changes in the T+1 Proposing Release than in the T+2 Proposing Release.459  

For example, Financial Industry Regulatory Authority (“FINRA”) Rule 11860, which could be 

used to facilitate compliance with proposed Rule 15c6-2, currently requires that affirmations be 

completed no later than the day after trade date and therefore may need to be amended to align 

                                                 
456  See T+1 Proposing Release, supra note 2, at 10464. 

457  See, e.g., Exchange Act Release No. 79734 (Jan. 4, 2017), 82 FR 3030 (Jan. 10, 2017) (File 

No. SR-NSCC-2016-009). 

458  The T+1 Report similarly indicates that SROs will likely need to update their rules to 

facilitate a transition to a T+1 standard settlement cycle.  See T+1 Report, supra note 61, at 35–36. 

459  See T+1 Proposing Release, supra note 2, at 10464 (discussing the same); see also T+2 

Adopting Release, supra note 4, at 15568–75 (discussing the effect of the T+2 transition on SRO 

rules and operations). 



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with the requirements in final Rule 15c6-2.  The Commission solicited comment on the extent to 

which the T+1 rule proposals may impact existing SRO rules and operations.460 

While urging the Commission to implement T+1, one commenter requested that the 

Commission deny or delay implementation of a National Securities Clearing Corporation 

(“NSCC”) rule to enhance capital requirements, stating that the NSCC rule would undermine the 

benefits of T+1 and that the calculation method is flawed.461  The Commission has completed its 

review of the NSCC proposed rule change and consideration of the comments on the proposal,462 

and the Commission issued an approval order finding that the NSCC proposed rule change was 

consistent with the requirements of the Exchange Act and the rules and regulations thereunder 

applicable to NSCC.463  Furthermore, the rule change concerned membership standards at NSCC 

related to minimum capital requirements, designed to ensure that capital requirements applied to 

                                                 
460  T+1 Proposing Release, supra note 2, at 10464. 

461  Wilson-Davis Letter, supra note 16, at 1. 

462  Comments responding to the NSCC rule proposal are available at 

https://www.sec.gov/comments/sr-nscc-2021-016/srnscc2021016.htm. 

463  See Exchange Act Release No. 95618 (Aug. 26, 2022); 87 FR 53796 (Sept. 1, 2022) (SR-

NSCC-2021-016) (approving proposed rule change to enhance capital requirements and make 

other changes); see also Exchange Act Release No. 93856 (Dec. 22, 2021), 86 FR 74185 (Dec. 29, 

2021) (SR-NSCC-2021-016) (publishing notice of filing and soliciting public comment); 

Exchange Act Release No. 94068 (Jan. 26, 2022), 87 FR 5544 (Feb. 1, 2022) (SR-NSCC-2021-

016) (designating a longer period within which to approve, disapprove, or institute proceedings to 

determine whether to approve or disapprove); Exchange Act Release No. 94494 (Mar. 23, 2022), 

87 FR 18444 (Mar. 30, 2022) (SR-NSCC-2021-016) (instituting proceedings to determine whether 

to approve or disapprove); Exchange Act Release No. 94168 (June 23, 2022), 87 FR 38792 (June 

29, 2022) (SR–NSCC-2021-016) (designating a longer period for Commission action on the 

proceedings to determine whether to approve or disapprove).   

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NSCC members appropriately incorporate the risks of their clearing activity, has already been 

implemented, and has no bearing on the length of the settlement cycle.   

In the context of corporate action events, one commenter advocated for more standardized 

practices, urging the Commission to consider more automation and transparency in issuer 

declarations of events to improve timeliness as well as support various SROs in adjusting certain 

rules related to the processing of events (e.g., FINRA Rules 11140 and 11810).464  The commenter 

did not make any specific suggestion for policy action regarding corporate action events that 

should be taken in connection with the current rulemaking or the transition to a shorter settlement 

cycle, and the Commission is not taking additional action at this time. 

In the T+1 Proposing Release, the Commission asked whether the DTC’s “cover/protect” 

process for certain voluntary reorganizations including tenders, exchanges, or rights offerings 

would be affected operationally or need to be changed in under a T+1 settlement cycle.465  One 

commenter claimed that the cover/protect period is inconsistently applied currently for many offers 

and recommended that, to the extent cover/protect periods will remain in effect, they should be 

aligned to the new T+1 settlement cycle.466  The commenter, however, did not identify any specific 

instances where the T+1 settlement cycle would give rise to issues with the “cover/protect” 

process.  In 2022, DTCC issued two reports identifying the functional changes at NSCC, DTC, and 

                                                 
464  SIFMA April Letter, supra note 16, at 14–15. 

465  See T+1 Proposing Release, supra note 2, at 10452.  This procedure enables DTC 

participants to allow their investors to make or change their final elections until the end of an 

offer’s expiration date; where an offer allows, participants provide DTC with a notice of 

guaranteed delivery, allowing later delivery of the shares or rights.  See id.; see also T+1 Report, 

supra note 61, at 20. 

466  See SIFMA April Letter, supra note 16, at 14. 



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DTCC ITP that will be implemented for T+1, including the planned approach to the cover/protect 

process.467  Such planning documents can help market participants understand and prepare for 

potential changes to processes like the cover/protect process.  If during implementation specific 

issues arise, the Commission encourages industry participants to bring them to the attention of 

Commission staff.  Accordingly, the Commission is not at this time providing additional guidance. 

One commenter stated that it appreciates the support of the Commission in the 

dematerialization of physical certificates, and the commenter requested continuing support for the 

electronic movement of securities, stating its support for the use of electronic medallion signature 

guarantees and a central hub to move documents between financial institutions that is secure and 

contains an audit trail of the receipt of documentation.  As stated in the T+1 Proposing Release, the 

Commission has long advocated a reduction in the use of certificates in the trading environment by 

immobilizing or dematerializing securities and has acknowledged that the use of certificates 

increases the costs and risks of clearing and settling securities for all parties processing the 

securities, including those involved in the U.S. system for clearance and settlement.468   

                                                 
467  See DTCC, Accelerated Settlement (T+1) – DTC, NSCC and ITP Functional Changes 14–

15 (Aug. 2022), https://www.dtcc.com/-/media/Files/PDFs/T2/T1-Functional-Changes.pdf; DTCC, 

T+1 Test Approach 15–16 (Aug. 2022), https://www.dtcc.com/-/media/Files/PDFs/T2/T1-Test-

Approach.pdf (each discussing changes to the cover/protect process). 

468  T+1 Proposing Release, supra note 2, at 10474. 

https://www.dtcc.com/-/media/Files/PDFs/T2/T1-Functional-Changes.pdf
https://www.dtcc.com/-/media/Files/PDFs/T2/T1-Test-Approach.pdf
https://www.dtcc.com/-/media/Files/PDFs/T2/T1-Test-Approach.pdf


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VII. Compliance Dates 

A. Exchange Act Rule 15c6-1 

In the T+1 Proposing Release, the Commission proposed March 31, 2024 as the 

compliance date for each of the proposed rules.469  The Commission received numerous comments 

regarding the compliance dates for Rules 15c6-1, 15c6-2, and 204-2, generally focused on the 

impact the proposed compliance date would have on the timing of an industry-wide effort to 

transition to a T+1 standard settlement cycle.  The commenters offered a range of potential 

alternatives.  For example, many individual investors recommended that the Commission 

accelerate the compliance date so that they and other retail investors could obtain the benefits of a 

shorter settlement cycle sooner than 2024.470  One commenter supported the proposed compliance 

date of March 31, 2024, stating that such a date was generally aligned with the industry-led effort 

regarding the T+1 transition.471  Given the extent of planning, operational changes, and testing 

                                                 
469  Id. at 10436.  

470  See, e.g., letter from Chris Barnard (Feb. 22, 2022); Mark C. Letter, supra note 19; letter 

from Jacy Carroll (Feb. 19, 2022); letter from Scott Clarke (Feb. 17, 2022); letter from Isaac 

Crawford (Feb. 20, 2022); letter from Nathan D. (Mar. 8, 2022); letter from Austin Englebert (Feb. 

22, 2022); letter from Justina Fullwood (Feb. 17, 2022); letter from Brayan Hernandez (Feb. 17, 

2022); Kelley Letter, supra note 16; Kyle 1 Letter, supra note 16; letter from Jason Layne (Feb. 

19, 2022); letter from Jordan Liske (Mar. 3, 2022); letter from Trevor Longmire (Feb. 17, 2022); 

letter from Joshua Lory (Feb. 20, 2022); Mahdere Letter, supra note 18; letter from Cain Maynard 

(Feb. 17, 2022); letter from Brian Padrick (Feb. 18, 2022); letter from Jimmy Pham (Feb. 18, 

2022); letter from Anthony R. (Feb. 18, 2022); Rathbone Letter, supra note 18; letter from Brian 

Renner (Feb. 9, 2022); letter from Daniel Richardson (Feb. 17, 2022); letter from Andrew Robison 

(Apr. 8, 2022); letter from Michael Ruiz (Feb. 17, 2022); Ryan 1 Letter, supra note 16; letter from 

Adrian Santos (Feb. 17, 2022); letter from Christopher Sneed (Feb. 18, 2022); Stauts Letter, supra 

note 16; Stewart Letter, supra note 16; letter from Casey C. Vallett (Feb. 17, 2022); Zach Letter, 

supra note 16.     

471  See Better Markets Letter, supra note 16, at 5–6.  



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necessary to achieve a successful and orderly transition to a T+1 standard settlement cycle, as 

discussed further below, the Commission is moving the compliance date to Tuesday, May 28, 

2024, which follows a Federal holiday for which both markets and banks will be closed, providing 

market participants with a three-day weekend to facilitate the transition to a T+1 standard 

settlement cycle. 

Multiple comments, including those submitted by members of the Industry Working Group 

(“IWG”) leading at the industry level the effort to facilitate an orderly transition to T+1,472  

recommended specifically that the Commission postpone the compliance date from March 31, 

2024, to September 3, 2024.473  Some commenters recommended that the Commission postpone 

the compliance date further, to no sooner than two years from the adoption of the proposed 

rules.474  In general, a commenter representing the IWG indicated that approximately 16 to 24 

months from adoption of a final rule would be necessary to implement a T+1 settlement cycle.475  

                                                 
472  As discussed in the T+1 Proposing Release, supra note 2, at 10445, the IWG is comprised 

of representatives from SIFMA, ICI, and DTCC, and is being coordinated in part by Deloitte.  The 

IWG published the T+1 Report, supra note 61, in September 2021 and the T+1 Playbook, supra 

note 134, in August 2022. 

473  See, e.g., CCMA April Letter, supra note 16, at 2; Fidelity Letter, supra note 16, at 12; 

IAA October Letter, supra note 222, at 1–2; ICI Letter, supra note 16, at 2, 8; MFA Letter, supra 

note 16, at 2; SIFMA April Letter, supra note 16, at 2; SIFMA August 26th Letter, supra note 207, 

at 1; letter from Tom Price, Managing Director, SIFMA, et al (Oct. 10, 2022), at 1 (“The 

Associations and DTCC Letter”); letter from Ken Bentsen, Jr., President and CEO, SIFMA (Dec. 

20, 2022), at 1 (“SIFMA December Letter”); letter from Ken Bentsen, Jr., President and CEO, 

SIFMA (Feb. 8, 2023), at 1 (“SIFMA February Letter”). 

474  See, e.g., SIFMA April Letter, supra note 16, at 2; State Street Letter, supra note 16, at 5 

(citing the planning, operational changes, and testing necessary for a successful transition). 

475  See SIFMA December Letter, supra note 473, at 3. 



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The above commenters provided several reasons for postponing from March to September.  

First, they prefer to align the transition with the Labor Day holiday weekend so that market 

participants can implement technology and other changes with the benefit of an extra day when 

markets would be closed.  Some commenters believe that the absence of a three-day weekend 

would create financial risk for market participants because they would lack sufficient time to 

validate production changes and validate a “fall back” plan to a T+2 standard if necessary in 

response to any issues that arise.476  Second, they prefer to enable the U.S. and Canadian markets 

to complete the transition over a commonly shared holiday weekend, and explain that Labor Day 

weekend is the only such weekend in 2024.477  In the commenters’ view, the absence of a unified 

transition in the U.S. and Canada would result in duplicative testing, as well as introduce issues 

with respect to dual-listed products, depository receipt conversions, ETF creations and 

redemptions, ADR conversions, buy-ins, and other activities associated with cross-border 

transactions.478  Third, they prefer to take more time to complete the transition process, including 

to budget, design and implement technology and operational changes, to conduct both individual-

level and industry-wide testing in advance of the transition, and to educate their customers and 

                                                 
476  See id. at 3; see also DTCC Letter, supra note 16, at 3 (supporting a three-day weekend to 

manage operational risks associated with the transition process); IAA April Letter, supra note 16, 

at 8 (supporting a three-day weekend to complete and test changes to systems outside of an active 

trading day); STA Letter, supra note 16, at 2. 

477  See SIFMA December Letter, supra note 473, at 2; SIFMA February Letter, supra note 

473, at 1; letter from Christopher Climo, Chief Operating Officer, Investment Industry Association 

of Canada (Feb. 9, 2023), at 2 (also stating a preference for a long weekend because of the extra 

day to validate that the transition went as planned, and for avoiding transitions at quarter-ends, 

such as March 31, because they are significant trading days, as well as corporate action dates). 

478  See SIFMA December Letter, supra note 473, at 4. 



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market participants generally regarding the operational and other changes necessary to ensure an 

orderly transition to a T+1 standard settlement cycle.479  Fourth, they believe that third-party 

vendors that support the U.S. securities market, including transfer agents and custodians, will not 

begin to plan for and implement operational changes until the Commission adopts a final rule.480  

The current version of the T+1 Playbook, published by the IWG, and which market participants are 

using to identify, design, and plan for the individual-level and industry-level implementation of a 

T+1 standard settlement cycle, contemplates activities, including industry-wide testing, that would 

continue into third quarter (Q3) 2024.481  DTCC has also published an industry-wide testing plan 

                                                 
479  See, e.g., CCMA April Letter, supra note 16, at 2; Fidelity Letter, supra note 16, at 12; 

IAA October Letter, supra note 222, at 1–2; ICI Letter, supra note 16, at 2, 8; MFA Letter, supra 

note 16, at 2; SIFMA April Letter, supra note 16, at 2; SIFMA August 26th Letter, supra note 207, 

at 1; see also OCC Letter, supra note 16, at 3 (stating that firms may already be engaged in other 

large technology projects that could impact T+1 readiness); SIFMA December Letter, supra note 

473, at 2 (stating that firms have planned to complete technology projects related to the LIBOR 

transition in Q2 2023); SIFMA February Letter, supra note 473, at 1 (explaining that the March 

date “will pose substantial and unnecessary risk to the marketplace and potentially create an 

immense amount of fails in the system” and that “[w]ithout proper testing, socialization, and 

notification, U.S. and international markets would be negatively impacted”); letter from Keith 

Evans, Executive Director, Canadian Capital Markets Association (Feb. 9, 2023), at 1 (explaining 

that a compliance date in the first quarter would introduce significant risks such as a material 

increase in failed trades, increased buy-ins, and higher collateral costs for Canadian and American 

market participants) (“CCMA February Letter”); letter from Deborah Mercer-Miller, Chair, 

Association of Global Custodians (Feb. 11, 2023) (also stating that a March 31, 2024 compliance 

date “could pose significant and unnecessary risk to the market and potentially create a high 

number of failed trades,” and expressing concern “about the ability of smaller market participants, 

vendors, and other service providers to enable T+1 settlement on a 13-month implementation 

timetable”). 

480  See SIFMA December Letter, supra note 473, at 4. 

481  See T+1 Playbook, supra note 134, at 10–14.  The T+1 Playbook was most recently 

updated in December 2022. 



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that contemplates testing until September 2024,482 though DTCC has also publicly acknowledged 

that the ultimate T+1 transition date would depend on the compliance date set by the Commission 

in this release.483 

The Commission acknowledges that a three-day weekend that includes a bank holiday will 

assist market participants in completing the transition to a T+1 standard settlement cycle in an 

orderly manner.  Although March 31, 2024 falls at the end of a three-day weekend commenters 

noted that this weekend is not a Federal holiday and does not provide a bank holiday, and so the 

banking industry and U.S. securities markets would not be synchronized in terms of implementing 

final testing and systems changes.484  As discussed throughout this section, the Commission is 

adopting a compliance date of May 28, 2024, which follows a Federal holiday for which both 

markets and banks will be closed. 

The Commission also acknowledges that aligning the U.S. and Canadian transitions would 

be beneficial to market participants in both markets, reducing complexity with respect to cross-

border transactions between the two jurisdictions.  The Canadian Securities Authorities proposed 

                                                 
482  See DTCC, DTCC T+1 Test Approach: Detailed Testing Framework (Jan. 2023), 

https://www.dtcc.com/ust1/-/media/Files/PDFs/T2/UST1-Detailed-Test-Document (explaining that 

the T+1 transition date has yet to be determined, and so for planning purposes the document 

references a Sept. 3, 2024 transition date). 

483  See Richard Schwartz, ‘We’re halfway through a marathon’ says DTCC as it releases 

document to help preparations for T+1, The Trade, Jan. 24, 2023, 

https://www.thetradenews.com/were-halfway-through-a-marathon-says-dtcc-as-it-releases-

document-to-help-preparations-for-t1/ (quoting Robert Cavallo, director, clearance and settlement, 

product management at DTCC as follows: “We are halfway through a marathon and still have a 

long way to go, but now that 2024 is in sight – whether that ultimate date is determined to be 

March or September – we must move from planning and development to testing.”). 

484  See, e.g., SIFMA December Letter, supra note 473, at 3. 

https://www.dtcc.com/ust1/-/media/Files/PDFs/T2/UST1-Detailed-Test-Document
https://www.thetradenews.com/were-halfway-through-a-marathon-says-dtcc-as-it-releases-document-to-help-preparations-for-t1/
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in December to implement a T+1 settlement cycle in Canada, explaining that “the close ties 

between the Canadian and American markets, in particular the large number of inter-listed 

securities” make it “critical” for Canadian markets to move in concert with the U.S.485  The 

Commission intends to work closely with the relevant Canadian authorities to ensure an orderly 

transition to T+1 for the securities markets in the U.S. and Canada that minimizes the potential for 

risk, such as the risks associated with settlement fails.   

Some commenters explained that market participants tend to implement technology freezes 

in the November to February timeframe to minimize the impact of staff on leave during the 

holidays and to facilitate various year-end accounting activities, including tax preparation.486  In 

the view of these commenters, a March 2024 compliance date would require that a substantial 

portion of technology changes and testing not occur in the November to February window, 

meaning they may need to occur primarily in March 2024, close in time to the compliance date.  

The Commission believes that a May 28, 2024, transition date will provide sufficient time beyond 

the typical November to February technology freeze to ensure an orderly transition.  In total, 

market participants will have more than fifteen months following the adoption of the final rules to 

take the appropriate steps to implement any technology or other changes to support a T+1 standard 

settlement cycle, providing a substantial amount of time to plan for and structure any technology 

freezes and to address personnel shortages while developing, building, testing and implementing 

                                                 
485  CSA, Notice and Request for Comment – Proposed Amendments to National Instrument 

24-101 Institutional Trade Matching and Settlement and Proposed Changes to Companion Policy 

24-101 Institutional Trade Matching and Settlement, Dec. 15, 2022, 

https://www.osc.ca/sites/default/files/2022-12/ni_20221215_24-101_rfc_trade-matching-

settlement.pdf.  

486  See, e.g., ICI Letter, supra note 16, at 9; see also AGC April Letter, supra note 16, at 4; 

SIFMA April Letter, supra note 16, at 3–4.  

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technology changes to support a T+1 standard settlement cycle.  Market participants should take 

appropriate steps, mindful of the May 28, 2024 compliance date, to ensure that technology 

implementation can occur consistent with the compliance date.  While a May 28, 2024 compliance 

date may require market participants to reallocate some resources and reprioritize some technology 

projects as compared to a September 3, 2024 compliance date, the Commission believes that a 

May 28, 2024 compliance date would also allow the substantial benefits of shortening the 

settlement cycle to be achieved sooner.487 

With respect to the preference for a September 2024 compliance date more generally to 

ensure appropriate time for sufficient planning, testing, and coordination with third-party 

vendors,488 the Commission appreciates that providing a longer implementation period until the 

compliance date for any rule necessarily provides more time to prepare, test, and educate than a 

shorter implementation period would.  As discussed in the T+1 Proposing Release, however, the 

Commission’s objective is to ensure an orderly transition to a T+1 standard settlement cycle that 

realizes the substantial benefits of shortening the settlement cycle as soon as possible.  In light of 

its objective of ensuring an orderly transition, the Commission is not accelerating the proposed 

compliance date, even though many commenters recommended that the Commission pursue a 

more expeditious timetable for the transition than even March 2024.489  Given that some market 

participants expressed interest for a faster transition to a T+1 settlement cycle,490 the Commission 

                                                 
487  See infra Part VIII.C.1 (discussing the anticipated benefits of shortening the settlement 

cycle). 

488  See supra notes 479–480 and accompanying text. 

489  See supra note 470 and accompanying text. 

490  See id. 



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believes that May 28, 2024, provides an effective balance of ensuring that the compliance date 

provides sufficient time for planning and executing an orderly transition while also promoting an 

expeditious process that will allow market participants to realize the substantial benefits of 

shortening the settlement cycle sooner than later.  In addition, the Commission believes that the 

May 28, 2024, compliance date will help ensure that market participants have sufficient time to 

implement the changes necessary to reduce risk, such as risks associated with the potential for 

increases in settlement fails.  The Commission also believes that the additional time will help 

ensure that market participants complete appropriate levels of testing, provide timely notice to 

potentially affected parties and vendors, and, more generally, engage in the education and outreach 

necessary to ensure an orderly transition.491 

Some commenters indicated that the Commission should set the compliance date no sooner 

than two years from the adoption of final rules.  As discussed above, while an additional seven 

months of preparation (i.e., two years from adoption of the final rules) likely would facilitate a 

higher level of preparation, testing, and education, the Commission believes that providing more 

than fifteen months until the compliance date for a T+1 standard settlement cycle is sufficient to 

ensure an orderly transition.  Also as discussed above, while fifteen months of preparation rather 

than two years may require some broker-dealers to reallocate some resources or reprioritize some 

technology projects to meet the May 28, 2024, transition, the Commission believes that the 

substantial benefits of shortening the settlement cycle would also be achieved sooner with a May 

28, 2024, transition.492   

                                                 
491  See supra note 479 and accompanying text. 

492  See infra Part VIII.D.5 (discussing the potential economic effects of a May 28, 2024, 

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Accordingly, the compliance date for the amendments to Rule 15c6-1—other than the 

amendment discussed in Part VII.B below—will be May 28, 2024.   

B. Exchange Act Rule 15c6-1(b): Exclusion for Security-Based Swaps 

In response to comments received, and as discussed in Parts II.B.2 and II.C.3, the 

Commission has modified Rule 15c6-1(b) to exclude security-based swaps from the requirements 

under Rule 15c6-1(a).  For the reasons discussed in Part II.C.3, and because Rule 15c6-1(b) 

concerns the scope of transactions excluded from the requirements of the Rule 15c6-1(a), the 

amendment will become effective upon the effective date. 

C. Exchange Act Rule 15c6-2 and Advisers Act Rule 204-2 

With respect to proposed Exchange Act Rule 15c6-2 and the proposed amendments to 

Advisers Act Rule 204-2, some commenters requested that the Commission set a compliance date 

later than the compliance date for Rule 15c6-1 to allow market participants time to focus their 

efforts on the T+1 transition, including the related technology and operational changes that they 

would need to design, build, test, and implement, without also having to take steps to ensure 

compliance with respect to same-day allocations, confirmations, and affirmations.493  The 

Commission disagrees.  Any technology changes, operational changes, or other efforts necessary 

to advance the same-day affirmation objective should occur in tandem with efforts focused on the 

T+1 transition, and so the Commission is adopting a May 28, 2024, compliance date for these 

rules, for the same reasons discussed in Part VII.A.  In the Commission’s view, market participants 

are more likely to take steps that materially advance the same-day affirmation objective if they 

                                                 
493  See, e.g., Fidelity Letter, supra note 16, at 12 (stating that “the proposed Compliance Date 

should apply only to the proposed move to T+1”); ICI Letter, supra note 16, at 5–7 (indicating that 

efforts to ensure compliance with Rule 15c6-2 would likely divert the time and resources that 

industry participants need to focus on the transition to T+1 settlement).   



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consider such steps alongside a more holistic review and, where necessary, modification of 

systems and operations to support the standard settlement cycle because, for institutional 

transactions, allocations, confirmations, and affirmations are integral to the settlement process.  

The Commission believes that, because the systems and operational changes necessary to facilitate 

a transition to T+1 standard settlement cycle generally would overlap with the systems that 

facilitate same-day affirmation, market participants would benefit from considering at the same 

time changes that can accommodate both sets of requirements. 

Accordingly, the compliance date for Rule 15c6-2 and the amendments to Rule 204 will be 

May 28, 2024.  

D. Exchange Act Rule 17Ad-27 

The Commission received one comment regarding the compliance date for Rule 17Ad-27, 

in which the commenter requested that, with respect to Rule 17Ad-27(b) requiring an annual report 

on straight-through processing, the Commission require submission of the first annual report only 

after the T+1 transition has been completed because it will help ensure a consistent baseline over 

time in the data provided by the CMSP as part of its annual report.494  Because the Commission is 

adopting a compliance date of May 28, 2024, for Rule 15c6-2 and the amendments to Rules 15c6-

1 and 204-2, and the Commission proposed the same compliance date for Rule 17Ad-27 as the 

other rules and rule amendments, a CMSP would not be required to submit its first annual report 

until after the T+1 transition has been completed.  Accordingly, the Commission believes that a 

May 28, 2024, compliance date is also appropriate for Rule 17Ad-27 and consistent with the 

comment received.  Consistent with the requirement in Rule 17Ad-27(d) that the report must be 

                                                 
494  See DTCC ITP September Letter, supra note 325, at 3.  



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filed within 60 days of the end of the twelve-month period covered by the report, the first report 

must be filed no later than March 1, 2025. 

VIII. Economic Analysis 

The Commission has prepared an economic analysis in connection with the amendments to 

Rules 15c6-1 and 204-2 and new Rules 15c6-2 and 17Ad-27.  The economic analysis begins with a 

discussion of the risks inherent in the standard settlement cycle for securities transactions and the 

impact that shortening the standard settlement cycle may have on the management and mitigation 

of these risks.  Next, the economic analysis summarizes and addresses comments relating to the 

costs and benefits of a shorter settlement cycle, as well as comments about the economic analysis 

provided in the T+1 Proposing Release.  Finally, the economic analysis discusses certain market 

frictions that potentially impair the ability of market participants to shorten the settlement cycle in 

the absence of a Commission rule.   

The discussion regarding settlement cycle risks and market frictions frames the 

Commission’s analysis of the rule’s benefits and costs in later sections.  The Commission believes 

that the amendment to Rule 15c6-1(a) will ameliorate these market frictions and thus will reduce 

the risks inherent in settlement.  The Commission further believes that the combination of 

amendments and new rules that it is adopting will advance two longstanding objectives shared by 

the Commission and the securities industry: the completion of trade allocations, confirmations, and 

affirmations on trade date (an objective often referred to as “same-day affirmation”) and the 

straight-through processing of securities transactions.495 

After discussing the aforementioned risks and market frictions, the economic analysis 

provides a baseline of current practices.  The economic analysis then discusses the likely economic 

                                                 
495  See T+1 Proposing Release, supra note 2, at 10452–53. 



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effects of the amendments and new rules, such as the costs and benefits of the adopted 

amendments and new rules, as well as its effects on efficiency, competition, and capital 

formation.496  The Commission has, where possible, attempted to quantify the economic effects 

expected to result from the amendments and new rules.  However, the Commission is unable to 

quantify some economic effects because it lacks the information necessary to provide a reasonable 

estimate.  In those instances, the discussion of the economic effects of the amendments and new 

rules is qualitative in nature. 

A. Background 

As previously discussed, the amendment to Rule 15c6-1(a) prohibits, unless otherwise 

expressly agreed to by both parties at the time of the transaction, a broker-dealer from effecting or 

entering into a contract for the purchase or sale of certain securities that provides for payment of 

funds and delivery of securities later than the first business day after the date of the contract 

subject to certain exceptions provided in the rule.  Several commenters addressed the impact that 

the length of the settlement cycle would have on risk to central counterparties (“CCPs”) and 

                                                 
496  Exchange Act section 3(f) requires the Commission, when it is engaged in rulemaking 

pursuant to the Exchange Act and is required to consider or determine whether an action is 

necessary or appropriate in the public interest, to consider, in addition to the protection of 

investors, whether the action will promote efficiency, competition, and capital formation.  See 15 

U.S.C. 78c(f).  In addition, Exchange Act section 23(a)(2) requires the Commission, when making 

rules pursuant to the Exchange Act, to consider among other matters, the impact that any such rule 

would have on competition and not to adopt any rule that would impose a burden on competition 

that is not necessary or appropriate in furtherance of the purposes of the Exchange Act.  See 15 

U.S.C. 78w(a)(2). 



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market participants (including credit, market and liquidity risk),497 margin requirements,498 capital 

liquidity,499 post-trade processing and operational efficiency,500 financial stability,501 and systemic 

risk in the financial system.502  In its analysis of the economic effects of the new rules and 

amendments to existing rules, the Commission has considered the risks that market participants, 

including broker-dealers, clearing agencies, investment advisers, and institutional and retail 

investors are exposed to during the settlement cycle and how those risks change with the length of 

the cycle. 

The settlement cycle spans the time between when a trade is executed and when cash and 

securities are delivered to the seller and buyer, respectively.  During this time, each party to a 

trade faces the risk that its counterparty may fail to meet its obligations to deliver cash or 

securities.  When a counterparty fails to meet its obligations to deliver cash or securities, the non-

                                                 
497  See, e.g., DTCC Letter, supra note 16, at 2–3; Fidelity Letter, supra note 16, at 2; IAA 

April Letter, supra note 16, at 1; ICI Letter, supra note 16, at 1, 3; MFA Letter, supra note 16, at 

1; OCC Letter, supra note 16, at 2; RMA Letter, supra note 16, at 3; SIFMA April Letter, supra 

note 16, at 2; State Street Letter, supra note 16, at 4. 

498  See, e.g., Cornell Law Letter, supra note 16, at 3; DTCC Letter, supra note 16, at 2–3; 

Fidelity Letter, supra note 16, at 2; MMI Letter, supra note 16, at 2; State Street Letter, supra note 

16, at 4. 

499  See, e.g., DTCC Letter, supra note 16, at 2–3; MMI Letter, supra note 16, at 2; State Street 

Letter, supra note 16, at 4. 

500  See, e.g., Cornell Law Letter, supra note 16, at 3; DTCC Letter, supra note 16, at 2–3; IAA 

April Letter, supra note 16, at 1; RMA Letter, supra note 16, at 3; State Street Letter, supra note 

16, at 4. 

501  See, e.g., ICI Letter, supra note 16, at 1; MMI Letter, supra note 16, at 2. 

502  See, e.g., Fidelity Letter, supra note 16, at 2; MFA Letter, supra note 16, at 1; MMI Letter, 

supra note 16, at 2; RMA Letter, supra note 16, at 3. 



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defaulting party may bear costs as a result.  For example, if the non-defaulting party chooses to 

enter into a new transaction, it will be with a new counterparty and will occur at a potentially 

different price.503  The length of the settlement cycle influences this risk in two ways: (i) through 

its effect on counterparty exposures to price volatility, and (ii) through its effect on the value of 

outstanding obligations. 

First, additional time allows asset prices to move further away from the price of the 

original trade.  For example, in a simplified model, where daily asset returns are statistically 

independent, the variance of an asset’s return over t days is equal to t multiplied by the daily 

variance of the asset’s return.  Thus, when the daily variance of returns is constant, the variance 

of returns increases linearly in the number of days.504  In other words, the more days that elapse 

between when a trade is executed and when a counterparty defaults, the larger the variance of 

price change will be, and the more likely that the asset’s price will deviate from the execution 

price.  The price change could be positive or negative, but in the event of a price increase, the 

buyer must pay more than the original execution price, and in the event of a price decrease, the 

                                                 
503  This applies to the general case of a transaction that is not novated to a CCP.  As described 

above, in its role as a CCP, NSCC becomes counterparty to both initial parties to a centrally 

cleared transaction.  In the case of such transactions, while each initial party is not exposed to the 

risk that its original counterparty defaults, both are exposed to the risk of CCP default.  Similarly, 

the CCP is exposed to the risk that either initial party defaults.   

504  More generally, because total variance over multiple days is equal to the sum of daily 

variances and variables related to the correlation between daily returns, total variance increases 

with time so long as daily returns are not highly negatively correlated.  See, e.g., MORRIS H. 

DEGROOT AND MARK J. SCHERVISH, PROBABILITY AND STATISTICS 216 (Addison-Wesley 

Publishing Co., 4th ed. 1986). 



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buyer may buy the security for less than the original execution price.505 

Second, the length of the settlement cycle directly influences the quantity of transactions 

awaiting settlement.  For example, assuming no change in transaction volumes, the volume of 

unsettled trades under a T+1 settlement cycle is approximately half the volume of unsettled 

trades under a T+2 settlement cycle.506  Thus, in the event of a default, counterparties would have 

to enter into a new transaction, or otherwise close out approximately half as many trades under a 

T+1 standard settlement cycle than under a T+2 standard.  This means that for a given adverse 

move in prices, the financial losses resulting from a counterparty default will be approximately 

half as large under a T+1 standard settlement cycle. 

Market participants manage and mitigate settlement risk in a number of specific ways.507  

Generally, these methods entail costs to market participants.  In some cases, these costs may be 

explicit.  For instance, clearing brokers typically explicitly charge introducing brokers to clear 

trades.  Other costs are implicit, such as the opportunity cost of assets posted as collateral or 

limits placed on the trading activities of a broker’s customers. 

The Commission believes that, given current trading volumes and complexity, certain 

market frictions may prevent securities markets from shortening the settlement cycle in the 

absence of regulatory intervention.  The Commission has considered two key market frictions 

related to investments required to implement a shorter settlement cycle.  The first is a coordination 

                                                 
505  Similarly, a seller whose counterparty fails faces similar risks with respect to the security 

price but in the opposite direction. 

506  The relationship is approximate because some trades may settle early or, if both 

counterparties agree at the time of the transaction, settle after the time limit in Rule 15c6-1(a). 

507  See T+2 Proposing Release, supra note 4, at 69251 (discussing the entities that compose 

the clearance and settlement infrastructure for U.S. securities markets). 



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problem that arises when some of the benefits of actions taken by one or more market participants 

are only realized when other market participants take a similar action.  For example, under the 

current regulatory structure, if a particular institutional investor were to make a technological 

investment to reduce the time it requires to match and allocate trades without a corresponding 

action by its clearing broker-dealers, the institutional investor cannot fully realize the benefits of its 

investment, as the settlement process is limited by the capabilities of the clearing agency for trade 

matching and allocation.  More generally, when every market participant must incur costs of an 

upgrade for the entire market to enjoy a benefit, the result is a coordination problem where each 

market participant may be reluctant to make the necessary investments until it can be reasonably 

certain that others will also do so.  In general, these coordination problems may be resolved if all 

parties can credibly commit to the necessary infrastructure investments.  Regulatory intervention is 

one possible way of coordinating market participants to undertake the investments necessary to 

support a shorter settlement cycle.  Such intervention could come through Commission rulemaking 

or through a coordinated set of SRO rule changes. 

In addition to coordination problems, a second market friction related to the settlement 

cycle involves situations where one market participant’s investments result in benefits for other 

market participants.  For example, if a market participant invests in a technology that reduces the 

error rate in its trade matching, not only does it benefit from fewer errors, but its counterparties and 

other market participants may also benefit from more robust trade matching.  However, because 

market participants do not necessarily take into account the benefits that may accrue to other 

market participants (also known as “externalities”) when market participants choose the level of 

investment in their systems, the level of investment in technologies that reduce errors might be less 

than efficient for the entire market.  More generally, underinvestment may result because each 



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participant only takes into account its own costs and benefits when choosing which infrastructure 

improvements or investments to make, and does not take into account the costs and benefits that 

may accrue to its counterparties, other market participants, or financial markets generally. 

Moreover, because market participants that incur similar costs to move to a shorter 

settlement cycle may nevertheless experience different levels of economic benefits, there is likely 

heterogeneity across market participants in the demand for a shorter settlement cycle.  This 

heterogeneity may exacerbate coordination problems and underinvestment.  Market participants 

that do not expect to receive direct benefits from settling transactions earlier may lack incentives to 

invest in infrastructure to support a shorter settlement cycle and thus could make it difficult for the 

market as a whole to realize the overall risk reduction that the Commission believes a shorter 

settlement cycle may bring. 

For example, the level and nature of settlement risk exposures vary across different types of 

market participants.  A market participant’s characteristics and trading strategies can influence the 

level of settlement risk it faces.  For example, large market participants will generally be exposed 

to more settlement risk than small market participants because they trade in larger volume.  

However, large market participants also trade across a larger variety of assets and may face less 

idiosyncratic risk in the event of counterparty default if the portfolio of trades that may have to be 

replaced is diversified.508  As a corollary, a market participant who trades a single security, in a 

single direction, against a given counterparty, may face more idiosyncratic risk in the event of 

                                                 
508  See Ananth Madhavan et al., Risky Business: The Clearance and Settlement of Financial 

Transactions (U. Pa. Wharton Sch. Rodney L. White Ctr. for Fin. Res. Working Paper No. 40-88, 

1988), at 4–5, https://rodneywhitecenter.wharton.upenn.edu/wp-

content/uploads/2014/04/8840.pdf; see also JOHN H. COCHRANE, ASSET PRICING 15 (Princeton 

Univ. Press rev. ed. 2009) (defining the idiosyncratic component of any payoff as the part that is 

uncorrelated with the discount factor). 

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counterparty failure than a market participant who trades in both directions with that counterparty. 

Furthermore, the extent to which a market participant experiences any economic benefits 

that may stem from a shortened standard settlement cycle likely depends on the market 

participant’s relative bargaining power.  While larger intermediaries may experience direct 

benefits from a shorter settlement cycle as a result of being required to post less collateral with a 

CCP, if they do not effectively compete for customers through fees and services as a result of 

market power, they may pass only a portion of these cost savings through to their customers.509   

The Commission believes that the amendment to Rule 15c6-1(a), which shortens the 

standard settlement cycle from T+2 to T+1 may mitigate the market frictions of coordination and 

underinvestment described above.  The Commission believes that by mitigating these market 

frictions, and for the reasons discussed below, the transition to a shorter standard settlement cycle 

will reduce the risks inherent in the clearance and settlement process. 

The shorter standard settlement cycle might also affect the level of operational risk in the 

clearance and settlement system.  Shortening the settlement cycle by one day will reduce the time 

that market participants have to resolve any errors that might occur in the clearance and settlement 

process.  Tighter operational timeframes and linkages required under a shorter standard settlement 

cycle might introduce new fragility that could affect market participants, specifically an increased 

risk that operational issues could affect transaction processing and related securities settlement.510 

                                                 
509  See infra Parts VIII.C.1. (Benefits) and VIII.C.2. (Costs). 

510 For example, the ability to compute an accurate net asset value (“NAV”) within the 

settlement timeframe is a key component for settlement of ETF transactions. See, e.g., 

BARRINGTON PARTNERS, AN EXTRAORDINARY WEEK: SHARED EXPERIENCES FROM INSIDE THE 

FUND ACCOUNTING SYSTEMS FAILURE OF 2015 (Nov. 2015), https://www.mfdf.org/docs/default-

source/fromjoomla/uploads/blog_files/sharedexperiencefromfasystemfailure2015.pdf. 

https://www.mfdf.org/docs/default-source/fromjoomla/uploads/blog_files/sharedexperiencefromfasystemfailure2015.pdf
https://www.mfdf.org/docs/default-source/fromjoomla/uploads/blog_files/sharedexperiencefromfasystemfailure2015.pdf


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In part, to lessen the likelihood that shortening the settlement cycle might negatively affect 

operational risk, the Commission and market participants have emphasized on multiple occasions 

the importance of accelerating the institutional trade clearance and settlement process by 

improving, among other things, the allocation, confirmation, and affirmation processes for the 

clearance and settlement of institutional trades, as well as improvements to the provision of central 

matching and electronic trade confirmation.511  A 2010 white paper by Omgeo (now DTCC ITP), 

published when the standard settlement cycle in the U.S. was still T+3, described same-day 

affirmation as “a prerequisite” of shortening the settlement cycle because of its impact on 

settlement failure rates and operational risk.512  According to previously cited statistics published 

by DTCC in 2011, regarding affirmation rates achieved through industry utilization of a certain 

matching/ETC provider, on average, 45% of trades were affirmed on trade date, 90% were 

affirmed by T+1, and 92% were affirmed by noon on T+2.513  Currently, only about 68% of trades 

achieve affirmation by 12:00 midnight at the end of trade date.514  While these numbers have 

improved over time, the improvements have been incremental and fallen short of achieving an 

affirmed confirmation by the end of trade date as is considered a securities industry best 

practice.515  Accordingly, and as described more fully below, to achieve the maximum efficiency 

                                                 
511  See supra Part III.A.; see also T+1 Proposing Release, supra note 2, at 10452 nn.146–148 

and accompanying text. 

512  Omgeo, Mitigating Operational Risk and Increasing Settlement Efficiency through Same 

Day Affirmation (SDA), at 2, 7 (Oct. 2010) (“Omgeo Study”), 

https://www.sifma.org/resources/thought-leader-resource-type/white-papers/.  

513  DTCC, Proposal to Launch a New Cost-Benefit Analysis on Shortening the Settlement 

Cycle, at 7 (Dec. 2011), supra note 263. 

514  DTCC ITP Forum Remarks, supra note 264.  

515  See T+1 Report, supra note 61, at 5.   

https://www.sifma.org/resources/thought-leader-resource-type/white-papers/


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and risk reduction that may result from completing the allocation, confirmation, and affirmation 

process on trade date, and to facilitate shortening the settlement cycle to T+1 or shorter, the 

Commission is adopting new Rule 15c6-2 under the Exchange Act to facilitate trade date 

completion of institutional trade allocations, confirmations, and affirmations.  Similarly, the 

Commission is also adopting new Rule 17Ad-27 under the Exchange Act to facilitate straight-

through processing by certain clearing agencies acting as CMSPs. 

B. Baseline 

The Commission uses as its economic baseline the clearance and settlement process as it 

exists today.  In addition to the current process that was described in the T+1 Proposing Release, 

the baseline includes rules adopted by the Commission, including Commission rules governing the 

clearance and settlement system, SRO rules,516 as well as rules adopted by regulators in other 

jurisdictions to regulate securities settlement in those jurisdictions.  The following section 

discusses several additional elements of the baseline that are relevant for the economic analysis of 

the amendment to Rule 15c6-1(a) because they are related to the financial risks faced by market 

participants that clear and settle transactions and the specific means by which market participants 

manage these risks. 

1. Central Counterparties 

NSCC, a subsidiary of DTCC, is a clearing agency registered with the Commission that 

                                                 
516  Certain SRO rules currently define “regular way” settlement as occurring on T+2 and, as 

such, would need to be amended in connection with shortening the standard settlement cycle to 

T+1.  See, e.g., MSRB Rule G-12(b)(ii)(B); FINRA Rule 11320(b).  Further, certain timeframes or 

deadlines in SRO rules key off the current settlement date, either expressly or indirectly.  In such 

cases, the SROs may also need to amend these rules.  See T+1 Proposing Release, supra note 2, at 

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operates the CCP for U.S. equity securities transactions.517  One way that NSCC mitigates the 

credit, market, and liquidity risk that it assumes through its novation and guarantee of trades as a 

CCP is by multilateral netting of securities trades’ delivery and payment obligations across its 

members.  By offsetting its members’ obligations, NSCC reduces the aggregate market value of 

securities and cash it must deliver to clearing members.  While netting reduces NSCC’s settlement 

payment obligations by a daily average of 98%,518 it does not fully eliminate the risk posed by 

unsettled trades because NSCC is responsible for payments or deliveries on any trades that it 

cannot fully net.  NSCC reported clearing an average of approximately $2.191 trillion each day 

during the second quarter of 2022,519 suggesting an average net settlement obligation of 

approximately $44 billion each day.520   

The aggregate settlement risk faced by NSCC is also a function of the probability of 

                                                 
517  A second DTCC subsidiary, DTC, also a clearing agency registered with the Commission, 

operates a central securities depository (“CSD”) with respect to securities transactions in the U.S. 

in several types of eligible securities including, among others, equities, warrants, rights, corporate 

debt and notes, municipal bonds, government securities, asset-backed securities, depositary 

receipts, and money market instruments. 

518  According to the DTCC, centralized multilateral netting reduces the value of payments that 

need to be exchanged each day by an average of 98%, and netting is particularly important during 

times of heightened volatility and volume.  DTCC, ADVANCING TOGETHER: LEADING THE 

INDUSTRY TO ACCELERATED SETTLEMENT, at 2 (Feb. 2021) (“DTCC White Paper”), 

https://www.dtcc.com/-/media/Files/PDFs/White%20Paper/DTCC-Accelerated-Settle-WP-

2021.pdf. 

519  See DTCC, Fixed Income Clearing Corporation and National Securities Clearing 

Corporation Public Quantitative Disclosure for Central Counterparties, Q2 2022, at 19 (Sept. 

2022) (“DTCC Quantitative Disclosure Results Q2 2022”), https://www.dtcc.com/-

/media/Files/Downloads/legal/policy-and-compliance/CPMI-IOSCO-Quantitative-Disclosure-

Results-2022Q2-1.pdf. 

520  Calculated as $2.191 trillion × 2% = $43.82 billion.   

https://www.dtcc.com/-/media/Files/PDFs/White%20Paper/DTCC-Accelerated-Settle-WP-2021.pdf
https://www.dtcc.com/-/media/Files/PDFs/White%20Paper/DTCC-Accelerated-Settle-WP-2021.pdf
https://www.dtcc.com/-/media/Files/Downloads/legal/policy-and-compliance/CPMI-IOSCO-Quantitative-Disclosure-Results-2022Q2-1.pdf
https://www.dtcc.com/-/media/Files/Downloads/legal/policy-and-compliance/CPMI-IOSCO-Quantitative-Disclosure-Results-2022Q2-1.pdf
https://www.dtcc.com/-/media/Files/Downloads/legal/policy-and-compliance/CPMI-IOSCO-Quantitative-Disclosure-Results-2022Q2-1.pdf


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clearing member default.  NSCC manages the risk of clearing member default by imposing certain 

financial responsibility requirements on its members.  For example, as of 2022, broker-dealer 

members of NSCC that are not municipal securities brokers, and do not intend to clear and settle 

transactions for other broker-dealers, must have excess net capital of $500,000 over the minimum 

net capital requirement imposed by the Commission, and $1,000,000 over the minimum net capital 

requirement if the broker-dealer member clears for other broker-dealers.521  Furthermore, each 

NSCC member is subject to other ongoing membership requirements, including a requirement to 

furnish NSCC with assurances of the member’s financial responsibility and operational capability, 

including, but not limited to, periodic reports of its financial and operational condition.522 

In addition to managing the member default risk, NSCC also takes steps to mitigate the 

impacts of a member default.  For example, in the normal course of business, CCPs are generally 

not exposed to market or liquidity risk because they expect to receive every security from a seller 

they are obligated to deliver to a buyer, and they expect to receive every payment from a buyer that 

they are obligated to deliver to a seller.  However, when a clearing member defaults, the CCP can 

no longer expect the defaulting member to deliver securities or make payments.  CCPs mitigate 

this risk by requiring clearing members to make contributions of financial resources to the CCP so 

that it may make payments or deliver securities in the event of a member default.  The level of 

                                                 
521  For a description of NSCC’s financial responsibility requirements for registered broker-

dealers, see NSCC Rules and Procedures, at 386 (effective Oct. 3, 2022) (“NSCC Rules and 

Procedures”), https://www.dtcc.com/~/media/Files/Downloads/legal/rules/nscc_rules.pdf.  

Pursuant to Rule 11 and Addendum K to NSCC’s Rules and Procedures, NSCC guarantees the 

completion of Continuous Net Settlement System (“CNS”) settling trades (“NSCC trade 

guaranty”) that have been validated.  Id. at 108-113, 414.   

522  See, e.g., id. at 89. 

https://www.dtcc.com/~/media/Files/Downloads/legal/rules/nscc_rules.pdf


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financial resources CCPs require clearing members to commit may be based on, among other 

things, the market and liquidity risk of a member’s portfolio, the correlation between the assets in 

the member’s portfolio and the member’s own default probability, and the liquidity of the assets 

posted as collateral. 

2. Market Participants – Investors, Broker-Dealers, and Custodians 

As discussed in Part II.B of the proposal, broker-dealers serve both retail and institutional 

customers.523  Aggregate statistics from the Board of Governors of the Federal Reserve System 

suggest that at the end of the second quarter 2022, U.S. households held approximately 40% of the 

value of corporate equity outstanding, 56% of the value of mutual fund shares outstanding, 2% of 

the value of corporate and foreign bonds, and 43% of the value of municipal securities, which 

provides a general picture of the share of holdings by retail investors.524 

In the third quarter of 2022, approximately 3,500 broker-dealers filed FOCUS Reports525 

with FINRA.  These firms varied in size, with median assets of approximately $1.3 million and 

average assets of approximately $1.6 billion.  The top 1% of broker-dealers held 80% of the assets 

of broker-dealers overall, indicating a high degree of concentration in the industry.  Of the 

approximately 3,500 filers, as of the end of 2021, 92 reported self-clearing public customer 

                                                 
523  See T+1 Proposing Release, supra note 2, at 10439–44. 

524  See Board of Governors of the Federal Reserve System, FEDERAL RESERVE STATISTICAL 

RELEASE, Z.1, FINANCIAL ACCOUNTS OF THE UNITED STATES: FLOW OF FUNDS, BALANCE SHEETS, 

AND INTEGRATED MACROECONOMIC ACCOUNTS, at 121, 122, 130 (Sept. 23, 2021), 

https://www.federalreserve.gov/releases/z1/20210923/z1.pdf.  

525  FOCUS Reports, or “Financial and Operational Combined Uniform Single” Reports, are 

monthly, quarterly, and annual reports that broker-dealers generally are required to file with the 

Commission and/or SROs pursuant to Exchange Act Rule 17a-5, 17 CFR 240.17a-5. 

https://www.federalreserve.gov/releases/z1/20210923/z1.pdf


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accounts and acting as introducing broker and sending orders to another broker-dealer for clearing,  

1,114 reported acting only as an introducing broker and sending orders to another broker-dealer for 

clearing , and 68 reported acting as both.526  Broker-dealers that identified themselves as self-

clearing broker-dealers, on average, had higher total assets than broker-dealers that identified 

themselves as introducing broker-dealers.  While the decision to self-clear may be based on many 

factors, this evidence is consistent with the argument that there may currently be high barriers to 

entry for providing clearing services as a broker-dealer. 

Clearing broker-dealers face liquidity risks, as they are obligated to make payments to 

clearing agencies on behalf of customers who purchase securities.  As discussed in more detail 

below, because customers of a clearing broker may default on their payment obligations to the 

broker, particularly when the price of a purchased security declines before settlement, clearing 

broker-dealers routinely seek to reduce the risks posed by their customers.  For example, clearing 

broker-dealers may require customers to contribute financial resources in the form of margin to 

margin accounts, to pre-fund purchases in cash accounts, or may restrict the use of customers’ 

unsettled funds.  These measures are in many ways analogous to measures taken by clearing 

agencies to reduce and mitigate the risks posed by their clearing members.  In addition, clearing 

broker-dealers may also mitigate the risks posed by customers by charging higher transaction fees 

that reflect the value of the customer’s option to default, thereby causing customers to internalize 

the cost of default that is inherent in the settlement process.527  While not directly reducing the risk 

posed by customers to clearing members, these higher transaction fees indirectly reduce that risk 

by allocating to customers a portion of the expected direct costs of customer default. 

                                                 
526  68 filers reported clearing public customer accounts via self clearing and via introducing. 

527  See infra Parts VIII.C.2. and VIII.C.4. 



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Another way the settlement cycle may affect transaction prices involves the potential use of 

funds during the settlement cycle.  To the extent that buyers may use the cash to purchase 

securities during the settlement cycle for other purposes, they may derive value from the length of 

time it takes to settle a transaction.  Testing this hypothesis, studies have found that sellers demand 

compensation for the benefit that buyers receive from deferring payment during the settlement 

cycle and that this compensation is incorporated in equity returns.528   

The settlement process also exposes investors to certain risks.  The length of the settlement 

cycle sets the minimum amount of time between when an investor places an order to sell securities 

and when the customer can expect to have access to the proceeds of that sale.  Investors take this 

into account when they plan transactions to meet liquidity needs.  For example, under T+2 

settlement, investors who experience liquidity shocks, such as unexpected expenses that must be 

met within one day, could not rely on obtaining funding solely through a sale of securities because 

the proceeds of the sale would not typically be available until the end of the second day after the 

sale.  One possible strategy to deal with such a shock under T+2 settlement would be to borrow to 

meet payment obligations on day T+1 and repay the loan on the following day with the proceeds 

from a sale of securities, incurring the cost of one day of interest.  Another strategy that investors 

may use is to hold financial resources to insure themselves from liquidity shocks. 

Some securities transactions depend on an FX transaction to provide the necessary funds.  

When settlement times for FX transactions are longer than that of the securities transaction it is 

                                                 
528  See Victoria Lynn Messman, Securities Processing: The Effects of a T+3 System on 

Security Prices (May 2011) (Ph.D. dissertation, University of Tennessee – Knoxville), 

http://trace.tennessee.edu/utk_graddiss/1002/; Josef Lakonishok & Maurice Levi, Weekend Effects 

on Stock Returns: A Note, 37 J. FIN. 883 (1982), https://www.jstor.org/stable/pdf/2327716.pdf; 

Ramon P. DeGennaro, The Effect of Payment Delays on Stock Prices, 13 J. FIN. RES. 133 (1990), 

http://onlinelibrary.wiley.com/doi/10.1111/j.1475-6803.1990.tb00543.x/abstract. 

http://trace.tennessee.edu/utk_graddiss/1002/
https://www.jstor.org/stable/pdf/2327716.pdf
http://onlinelibrary.wiley.com/doi/10.1111/j.1475-6803.1990.tb00543.x/abstract


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meant to finance, the purchaser may be required to find an alternative source of funds to settle the 

securities transaction.  The Commission is unable to quantify the fraction of securities trades that 

depend on a corresponding FX transaction or the relative frequency with which market participants 

employ alternative methods when FX and securities settlement cycles differ, because it is unaware 

of a source for data on how securities transactions are funded that would be a necessary 

prerequisite to providing a reasonable estimate.  It is the experience of Commission staff that, for 

retail investors, many brokers require their retail clients to prefund their transactions including 

those that require a corresponding FX transaction. 

Integral to settlement of institutional trades is achieving an affirmed confirmation, which 

can require a series of communications between a broker-dealer and its institutional customer.  As 

a general matter, most broker-dealers maintain policies and procedures to ensure the timely 

settlement of their transactions.529  An affirmed confirmation by the end of trade date is considered 

a securities industry best practice.530  Currently, despite existing commercial incentives and 

continuing efforts to promote “same-day affirmation” as an industry best practice, only about 68% 

of trades achieve affirmation on trade date.531   

In order to deliver shares that a customer has sold, it may be necessary for a broker-dealer 

to initiate a bona fide recall of a loaned security to be able to mark the sale of such loaned but 

recalled security “long” for purposes of Rule 200(g)(1).532  Under a T+2 standard settlement cycle, 

the closeout period for sales marked “long” is T+5, and so recalls of loaned securities need to be 

                                                 
529  See, e.g., SIFMA August 26th Letter, supra note 207, at 2. 

530  See T+1 Report, supra note 61, at 5.   

531 See DTCC ITP Forum Remarks, supra note 264. 

532  See T+1 Proposing Release, supra note 2, at 10461. 



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delivered by T+4 to be available to close out any fails on sales marked “long” by the beginning of 

regular trading hours on T+5.  To meet this timeframe, a number of broker-dealers have securities 

lending agreements that set the period of delivery for delivering loaned but recalled securities to 

two settlement days after initiation of a recall.  The recall of a loaned security does not require that 

a reason be given so it is not possible to determine the volume of security loan recalls that are 

initiated in order to complete settlement before the closeout period. 

Rule 15c6-1(c) establishes a T+4 settlement cycle for firm commitment underwritings for 

securities that are priced after 4:30 p.m. Eastern Time (“ET”).533  Under the rule, the broker or 

dealer must effect or enter into a contract for the purchase or sale of those securities that provide 

for payment of funds and delivery of securities no later than the fourth business day after the date 

of the contract unless otherwise expressly agreed to by the parties at the time of the transaction.  

Table 1 provides statistics for the number of initial public offerings of equity and aggregate 

proceeds by year from 2000-2022.  The Commission believes that most equity initial public 

offerings (“IPOs”), particularly larger offerings, are made on a firm commitment basis.  Although 

the Commission is not aware of a comprehensive and accessible database that includes settlement 

time by offering, it understands that the current market practice for substantially all equity offering 

is to settle on the current T+2 timeframe, notwithstanding the exceptions provided in Rule 15c6-

1(c) for firm commitment offerings priced after 4:30 pm ET.534  The third and fourth columns of 

Table 1 contain estimates for total IPO proceeds from separate sources using separate 

methodologies but show similar patterns.  The Commission understands that debt offerings 

                                                 
533  17 CFR 240.15c6-1(c).   

534  See T+1 Report, supra note 61, at 31.  The U.S. moved to the current T+2 settlement in 

September 2017. 



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frequently make use of the exception provided by 15c6-1(d) and that substantially all of the 

purchasers in debt securities offerings are large, sophisticated institutions. 

Table 1.  Number of Initial Public Offerings and Aggregate Proceeds (2000-2022)1 

Year  Number 

of IPOs 

Aggregate Proceeds 

($ Billions) 

Aggregate Proceeds 

SIFMA ($B) 

2000  380 64.80 106.2 

2001  80 35.29 46.0 

2002  66 22.03 27.2 

2003  63 9.54 18.1 

2004  173 31.19 50.5 

2005  159 28.23 40.7 

2006  157 30.48 46.4 

2007  159 35.66 52.3 

2008  21 22.76 26.7 

2009  41 13.17 27.0 

2010  91 29.82 43.5 

2011  81 26.97 40.1 

2012  93 31.11 46.2 

2013  158 41.56 60.0 

2014  206 42.20 93.5 

2015  118 22.00 32.2 

2016  75 12.52 20.7 

2017  106 22.98 39.2 

2018  134 33.47 49.9 

2019  112 39.18 48.8 

2020  165 61.87 85.4 

2021  311 119.36 153.6 

2022  39 7.01 8.5 
1 The second and third columns contain estimates derived from IPOs with an offer price 

of at least $5.00, excluding ADRs, unit offers, closed-end funds, real estate investment 

trusts (“REITs”), natural resource limited partnerships, small best efforts offers, banks 

and savings and loans (S&Ls), and stocks not listed in data maintained by the Center for 

Research in Security Prices (“CRSP” includes Amex, NYSE, and NASDAQ stocks).  

Proceeds exclude overallotment options.  Estimates from IPO Statistics, Jay Ritter, 

University of Florida, at 3, https://site.warrington.ufl.edu/ritter/files/IPO-Statistics.pdf.  

The fourth column provides an estimate by SIFMA of total IPO proceeds using their own 

methodology.  The data is available at https://www.sifma.org/resources/research/us-

equity-and-related-securities-statistics/, but we understand their reported IPO data 

“includes rank eligible deals; excludes BDCs, SPACs, ETFs, CLEFs & rights offers.”  

See SIFMA Research Quarterly –3Q22 (Oct. 2022), at 5, https://www.sifma.org/wp-

content/uploads/2022/10/US-Research-Quarterly-Equity-2022-10-19-SIFMA.pdf.   

 

https://www.sifma.org/wp-content/uploads/2022/10/US-Research-Quarterly-Equity-2022-10-19-SIFMA.pdf
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Custodians hold customers’ securities for safekeeping in order to minimize the risk of the 

misappropriation, misuse, or theft.535  One of the primary responsibilities of a custodian is the 

tracking, settling, and reconciling of assets that are acquired and disposed of by the investor.  In 

this role, custodians affirm up to 70% of institutional trades536 and up to 70% of investment adviser 

trades.537  There are 48 custodian banks that are members of The Depository Trust Company 

(“DTC”).   

3. Investment Companies and Investment Advisers 

Shares issued by investment companies may settle on different timeframes.  For example, 

ETFs, certain closed-end funds, and mutual funds that are sold by brokers generally settle on 

T+2.538  By contrast, mutual fund shares that are directly purchased from the fund generally settle 

on T+1.  Mutual funds that settle on a different basis than the underlying investments currently 

face liquidity risk as a result of a mismatch between the timing of mutual fund share transaction 

settlement and the timing of fund portfolio security transaction order settlements.  Mutual funds 

may manage these particular liquidity needs by, among other methods, using cash reserves, back-

up lines of credit, or interfund lending facilities to provide cash to cover the settlement 

                                                 
535  Although many securities are held in electronic form, e.g., equities at DTC, the custodian 

performs similar functions whether the securities are held in physical or electronic form. 

536  See DTCC ITP Forum Remarks, supra note 264. 

537  See IAA April Letter, supra note 16, at 4; see also ICI Letter, supra note 16, at 5; ISITC 

Letter, supra note 29, at 2. 

538  The Commission applied Rule 15c6-1 to broker-dealer contracts for the purchase and sale 

of securities issued by investment companies, including mutual funds, because the Commission 

recognized that these securities represented a significant and growing percentage of broker-dealer 

transactions.  T+3 Adopting Release, supra note 3, at 52900. 



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mismatch.539  As of the end of 2021, there were 11,577 open-end funds (including money market 

funds and ETFs).540  The assets of these funds were approximately $34.2 trillion.541  Of the 11,577 

funds noted, 2,690 were ETFs with combined assets of $7.2 trillion.542 

Under section 22(e) of the Investment Company Act, an open-end fund generally is 

required to pay shareholders who tender shares for redemption within seven days of their tender.543  

Open-end fund shares that are sold through broker-dealers must be redeemed within two days of a 

redemption request because broker-dealers are subject to Rule 15c6-1(a). 

Furthermore, 17 CFR 270.22c-1,544 the “forward pricing” rule, requires funds, their 

principal underwriters, and dealers to sell and redeem fund shares at a price based on the current 

NAV next computed after receipt of an order to purchase or redeem fund shares, even though cash 

proceeds from purchases may be invested or fund assets may be sold in subsequent days in order to 

satisfy purchase requests or meet redemption obligations. 

                                                 
539  See Open-End Fund Liquidity Risk Management Programs; Swing Pricing; Re-Opening of 

Comment Period for Investment Company Reporting Modernization Release, Investment 

Company Act Release No. 31835 (Sept. 22, 2015), 80 FR 62274, 62285 n.100 (Oct. 15, 2015). 

540  See ICI, 2022 INVESTMENT COMPANY FACT BOOK, A REVIEW OF TRENDS AND ACTIVITIES 

IN THE INVESTMENT COMPANY INDUSTRY, at 21 (2022) (“2022 ICI Fact Book”), 

https://www.icifactbook.org/pdf/2022_factbook.pdf.  This comprises 8,887 open-end mutual 

funds, including mutual funds that invest primarily in other mutual funds, and 2,690 ETFs, 

including ETFs that invest primarily in other ETFs. 

541  See id. at 22. 

542  See id. 

543  15 U.S.C. 80a–22(e). 

544  Rule 22c-1 under the Investment Company Act. 

https://www.icifactbook.org/pdf/2022_factbook.pdf


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Based on Form ADV filings received through August 31, 2022, the Commission estimates 

that there are approximately 15,160 advisers registered with the Commission are required to make 

and keep copies of books and records relating to their advisory business.545  For any transaction 

that is subject to the requirements of Rule 15c6-2(a), the final amendments to Rule 204-2 will 

require registered investment advisers to make and keep copies of confirmations received, and any 

allocation and each affirmation sent or received, with a date and time stamp for each allocation and 

affirmation that indicates when the allocation and affirmation was sent or received.  The 

Commission understands that not all investment advisers may engage in transactions that are 

subject to the requirements of Rule 15c6-2(a).546  Of the 15,160 advisers registered with the 

Commission, we estimate that 12,991 manage institutional accounts and are thus likely to facilitate 

transactions that are subject to the requirements of Rule 15c6-2(a).547   

One commenter stated that timestamps are already included in electronic communications 

protocols.548  As discussed in Part IV.C, the Commission believes that timestamps are generally 

included in many electronic communications and many advisers currently send allocations and 

affirmations electronically, though some advisers may not retain these types of records.   

4. Current Market for Clearance and Settlement Services 

As described in Part II.B of the proposal, two affiliated entities, NSCC and DTC, facilitate 

                                                 
545  See infra note 4 to Table 2. 

546  For more discussion, see infra Part IX.A. 

547  See infra note 4 to Table 2. 

548  See FIX Trading Letter, supra note 218; cf. a separate commenter stated “Additional 

requirements for registered investment advisers to timestamp certain trading records adds further 

complexity and cost to those managers’ efforts.”  See AIMA Letter, supra note 29, at 2. 



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clearance and settlement activities in U.S. securities markets in most instances.549  There is limited 

competition in the provision of the services that these entities provide.  NSCC is the CCP for 

trades between broker-dealers involving equity securities, corporate and municipal debt, and UITs 

for the U.S. market.  DTC is the CSD that provides custody and book-entry transfer services for 

the vast majority of securities transactions in the U.S. market involving equities, corporate and 

municipal debt, money market instruments, ADRs, and ETFs.  CMSPs electronically facilitate 

communication among a broker-dealer, an institutional investor or its investment adviser, and the 

institutional investor’s custodian to reach agreement on the details of a securities trade, thereby 

creating binding terms.550  As discussed further in Part III.D of the T+1 Proposing Release, FINRA 

currently requires broker-dealers to use a clearing agency, such as DTC or a CMSP, or a qualified 

vendor under the rule to complete delivery-versus-payment transactions with their customers.551 

In addition, a CMSP may offer a “matching” process by which it compares and reconciles 

the broker-dealer’s trade details with the institutional investor’s trade details to determine whether 

the two descriptions of the trade agree, at which point it can generate an affirmation to effect 

settlement of the trade.  As part of such process, the CMSP may offer services that can assist with 

the automated identification of trades that do not match, allowing market participants to identify 

errors and remediate any trade information that does not match.  Market participants also rely on a 

                                                 
549  See T+1 Proposing Release, supra note 2, at 10439–40. 

550  See id.; see also T+2 Proposing Release, supra note 4, at 69246.  Although there are three 

CMSPs, only one is active.  That CMSP currently submits nonpublic monthly reports that include 

data on monthly trade volume processed and affirmations completed on T, T+1, and settlement 

date. 

551  See T+1 Proposing Release, supra note 2, at 10458 n.181 and accompanying text. 



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variety of “local” matching tools that allow them to compare trade information received from 

another party against their own trade information.552  These local matching tools often rely on 

inconsistent SSI data independently maintained by broker-dealers, investment managers, 

custodians, sub-custodians, and agents on separate databases.553  As discussed in Part II.B., 

processing institutional trades requires managing the back and forth involved with transmitting and 

reconciling trade information among the parties, functionally matching and re-matching with the 

counterparties to the trade, as well as custodians and agents, to facilitate settlement.  It also 

requires market participants to engage in allocation processes, such as allocation-level 

cancellations and corrections, some of which are still processed manually.554   

Broker-dealers compete to provide services to retail and institutional customers.  Based on 

the large number of broker-dealers, there is likely a high degree of competition among broker-

dealers.  However, the markets that broker-dealers serve may be segmented along lines relevant for 

the analysis of competitive effects of the amendment to Rule 15c6-1(a).  As noted above, the 

                                                 
552  Local matching platforms include, for example, the trade reconciliation and inventory 

management tools that market participants use to reconcile trade information.  See DTCC, 

EMBRACING POST-TRADE AUTOMATION: SEVEN WAYS THE SELL-SIDE WILL BENEFIT FROM NO-

TOUCH FUTURE (Nov. 2020) (“DTCC Embracing Post-Trade Automation”), 

https://www.dtcc.com/itp-hub/dist/downloads/broker_supplement_11.11.20z.pdf.  Examples of 

such service providers include Bloomberg, Corfinancial, Lightspeed, and SS&C Technologies. 

553  See id. for more information about the use and impact of “local” matching platforms.  A 

2020 DTCC survey of global broker-dealers found that certain institutional post-trade processing 

costs could be reduced by 20-25% through leveraging post-trade automation, which would in turn 

eliminate redundancies and manual processing and mitigate operational risks.  See DTCC, DTCC 

Identifies Seven Areas of Broker Cost Savings as a Result of Greater Post-Trade Automation (Nov. 

18, 2020), https://www.dtcc.com/news/2020/november/18/dtcc-identifies-seven-areas-of-broker-

cost-savings-as-a-result-of-greater-post-trade-automation.   

554  See DTCC, RE-IMAGINING POST-TRADE: NO-TOUCH PROCESSING WITHIN REACH, at 4 

(Sept. 2019), https://www.dtcc.com/-/media/Files/Downloads/Institutional-Trade-Processing/ITP-

Story/DTCC-Re-Imagining-Post-Trade.pdf.  

https://www.dtcc.com/itp-hub/dist/downloads/broker_supplement_11.11.20z.pdf
https://www.dtcc.com/news/2020/november/18/dtcc-identifies-seven-areas-of-broker-cost-savings-as-a-result-of-greater-post-trade-automation
https://www.dtcc.com/news/2020/november/18/dtcc-identifies-seven-areas-of-broker-cost-savings-as-a-result-of-greater-post-trade-automation
https://www.dtcc.com/-/media/Files/Downloads/Institutional-Trade-Processing/ITP-Story/DTCC-Re-Imagining-Post-Trade.pdf
https://www.dtcc.com/-/media/Files/Downloads/Institutional-Trade-Processing/ITP-Story/DTCC-Re-Imagining-Post-Trade.pdf


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number of broker-dealers that self-clear public customer accounts is smaller than the set of broker-

dealers that introduce and do not self-clear.  This could mean that introducing broker-dealers 

compete more intensively for customers than clearing broker-dealers.  Further, clearing broker-

dealers must meet requirements set by NSCC and DTC, such as financial responsibility 

requirements and clearing fund requirements.  These requirements represent barriers to entry for 

brokers that may wish to become clearing broker-dealers, limiting competition among such 

entities. 

Competition for customers affects how the costs associated with the clearance and 

settlement process are allocated among market participants.  In managing the expected costs of 

risks from their customers and the costs of compliance with SRO and Commission rules, clearing 

broker-dealers decide what fraction of these costs to pass through to their customers in the form of 

fees and margin requirements, and what fraction of these costs to bear themselves.  The level of 

competition that a clearing broker-dealer faces for customers will dictate the extent to which it is 

able to pass these costs through to its customers. 

In addition, several factors affect the current levels of efficiency and capital formation in 

the various functions that make up the market for clearance and settlement services.  First, at a 

general level, market participants occupying various positions in the clearance and settlement 

system must post or hold liquid financial resources, and the level of these resources is a function of 

the length of the settlement cycle.  For example, NSCC collects clearing fund contributions from 

members to help ensure that it has sufficient financial resources in the event that one of its 

members defaults on its obligations to NSCC.  As discussed above, the length of the settlement 

cycle is one determinant of the size of NSCC’s exposure to clearing members.  As another 

example, mutual funds may manage liquidity needs by, among other methods, using cash reserves, 



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back-up lines of credit, or interfund lending facilities to provide cash.  These liquidity needs, in 

turn, are related to the mismatch between the timing of mutual fund transaction order settlements 

and the timing of fund portfolio security transaction order settlements. 

Holding liquid assets solely for the purpose of mitigating counterparty risk or liquidity 

needs that arise as part of the settlement process could represent an allocative inefficiency.  That is, 

because firms that are required to hold these assets might prefer to put them to alternative uses, and 

because these assets may be more efficiently allocated to other market participants who value them 

for their fundamental risk and return characteristics rather than for their value as collateral.  To the 

extent that any intermediaries between buyer and seller, who facilitate clearance and settlement of 

the trade, bear costs as a result of inefficient allocation of collateral assets, these inefficiencies may 

be reflected in higher transaction costs. 

The settlement cycle may also have more direct impacts on transaction costs.  As noted 

above, clearing broker-dealers may charge higher transaction fees to reflect the value of the 

customer’s option to default and these fees may cause customers to internalize the cost of the 

default options inherent in the settlement process.  However, these fees also make transactions 

more costly and may influence the willingness of market participants to efficiently share risks or to 

supply liquidity to securities markets.  Taken together, inefficiencies in the allocation of resources 

and risks across market participants may serve to impair capital formation. 

Finally, market participants may make processing errors in the clearance and settlement 

process.555  Market participants have stated that manual processing and a lack of automation result 

                                                 
555  See, e.g., Omgeo Study, supra note 512, at 12; see also T+1 Report, supra note 61, at 26. 



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in processing errors.556  Although some of these errors may be resolved within the settlement cycle 

and not result in a failed trade, those that are not may result in failed trades, which appear in the 

failure to deliver data.557  Further, market participants may incorporate the likelihood that 

processing errors result in delays in payments or deliveries into securities prices.558  Figure 1 

shows total fails to deliver in shares at mid-month and end-of-month from January 2016 through 

mid-December 2022.  The change in the U.S. settlement cycle from T+3 to T+2 became effective 

in September 2017.  Although processing errors are only one reason a trade may result in a fail to 

deliver, there is no marked change in the fails data around the previous shortening of the settlement 

cycle.   

  

                                                 
556  Matthew Stauffer, Managing Director, Head of Institutional Trade Processing at DTCC, 

stated, “The findings of our survey highlight the benefits of leveraging automated post-trade 

solutions to reduce the costs of operational functions and the risk inherent in manual processes.”  

See DTCC Identifies Seven Areas of Broker Cost Savings as a Result of Greater Post-Trade 

Automation, supra note 524. 

557  See Statement by The Depository Trust & Clearing Corporation, U.S. Securities and 

Exchange Commission Securities Lending and Short Sales Roundtable, at 3 (Sept. 30, 2009), 

https://www.sec.gov/comments/4-590/4590-32.pdf; see also T+1 Report, supra note 61, at 26. 

558  See Messman, supra note 528. 

https://www.sec.gov/comments/4-590/4590-32.pdf


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Figure 1.  Outstanding fails to deliver in shares. 

Total fails-to-deliver in shares represents the aggregate net balance of shares that failed to be 

delivered as of the last trading day prior to mid-month and the last trading day prior to the end of 

the month recorded in the NSCC CNS system.  “Share Price>$1” or “Share Price greater than $1” 

includes only fails-to-deliver for shares with a closing price greater than $1 as of the end of the 

period.  The data is available at https://www.sec.gov/data/foiadocsfailsdatahtm. 

 

C. Analysis of Benefits, Costs, and Impact on Efficiency, Competition, and Capital 

Formation 

1. Benefits 

Several commenters noted that shortening the settlement cycle would reduce the risks 

associated with the settlement cycle.559  Shortening the settlement cycle should reduce both the 

                                                 
559  See supra notes 497–502. 



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aggregate market value of all unsettled trades and the amount of time that CCPs, or the 

counterparties to a trade, may be subject to market and credit risk from an unsettled trade.560  First, 

holding transaction volumes constant, the market value of transactions awaiting settlement at any 

given point in time under a T+1 settlement cycle will be approximately one half lower than under 

the current T+2 settlement cycle.  Using the risk mitigation framework described in Part VIII.B.1, 

based on published statistics from the second quarter of 2022,561 and holding average dollar 

volumes constant, the aggregate notional value of unsettled transactions at NSCC is estimated to 

fall from nearly $88 billion to approximately $44 billion.562 

Second, a market participant that experiences counterparty default and enters into a new 

transaction under a T+2 settlement cycle is exposed to more market risk than would be the case 

under a T+1 settlement cycle.  As a result, market participants that are exposed to market, credit, 

and liquidity risks would be exposed to less risk under a T+1 settlement cycle.  This reduction in 

risk may also extend to mutual fund transactions conducted with broker-dealers that currently 

settle on a T+2 basis.563  To the extent that these transactions currently give rise to counterparty 

risk exposures between mutual funds and broker-dealers, these exposures may decrease as a 

consequence of a shorter settlement cycle.  In addition, a shorter standard settlement cycle should 

reduce liquidity risks that could arise by allowing investors to obtain the proceeds of securities 

                                                 
560  See T+1 Proposing Release, supra note 2, at 10447–48.  

561  See DTCC Quantitative Disclosure Results Q2 2022, supra note 519, at 14.  

562  See id. at 20.  

563  In today’s environment, ETFs and certain closed-end funds clear and settle on a T+2 basis.  

Open-end funds (i.e., mutual funds) generally settle on a T+1 basis, except for certain retail funds 

which typically settle on T+2.  Thus, the proposed amendment to Rule 15c6-1(a) would require 

ETFs, closed-end funds, and mutual funds settling on a T+2 basis to revise their settlement 

timeframes.   



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transactions sooner.  These risks affect all market participants, are difficult to diversify away, and 

require resources to manage and mitigate.   

CCPs require clearing members to post financial resources in order to secure members’ 

obligations to deliver cash and securities to the CCP.  Clearing members in turn impose fees on 

their customers, e.g., introducing broker-dealers, institutional investors, and retail investors.  The 

margin requirements required by the CCP are a function of the risk posed to the CCP by the 

potential default of the clearing member.  That risk is a function of several factors including the 

value of trades submitted for clearing but not yet settled, and the volatility of the securities prices 

that make up those unsettled trades.  As these factors are an increasing function of the time to 

settlement, by reducing settlement from T+2 to T+1, a CCP may require less collateral from its 

members, and the CCP’s members may, in turn, reduce fees that they may pass down to other 

market participants, including introducing broker-dealers, institutional investors, and retail 

investors. 

Any reduction in clearing broker-dealers’ required margin should provide multiple benefits.  

First, financial resources that are used to mitigate the risks of the clearance and settlement process 

can be put to alternative uses.  Reducing the financial risks associated with the overall clearance 

and settlement process should reduce the amount of collateral required to mitigate these risks, 

which should reduce the costs that market participants bear to manage and mitigate these risks, and 

the allocative inefficiencies that may stem from risk management practices.564  Second, assets that 

are valuable because they are particularly suited to meeting financial resource obligations may be 

better allocated to market participants that hold these assets for their fundamental risk and return 

                                                 
564  See supra Part VIII.B. (further discussing financial resources collected to mitigate and 

manage financial risks). 



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characteristics.  This improvement in allocative efficiency may improve capital formation. 

A portion of the savings from less costly risk management under a T+1 standard settlement 

cycle relative to a T+2 standard settlement cycle may flow through to investors.  Investors may be 

able to profitably redeploy financial resources that were once needed to fund higher clearing fees, 

for example. 

Market participants might also individually benefit through reduced clearing fund deposit 

requirements.  In 2012, the BCG Study estimated that cost reductions related to reduced clearing 

fund contributions resulting from moving from a T+3 to a T+2 settlement cycle would amount to 

$25 million per year.565  In addition, a shorter settlement cycle might reduce liquidity risk by 

allowing investors to obtain the proceeds of their securities transactions sooner.  Reduced liquidity 

risk may be a benefit to individual investors, but it may also reduce the volatility of securities 

markets by reducing liquidity demands in times of adverse market conditions, potentially reducing 

the correlation between market prices and the risk management practices of market participants.566 

                                                 
565  See The Boston Consulting Group (“BCG”), COST BENEFIT ANALYSIS OF SHORTENING THE 

SETTLEMENT CYCLE, at 10 (Oct. 2012) (“BCG Study”), https://1library.net/document/ynm3kx1z-

cost-benefit-analysis-of-shortening-the-settlement-cycle.html.  According to SIFMA, average daily 

trading volume in U.S. equities grew from $253.1B in 2011 to $564.7B in 2021, an increase of 

123%.  See CBOE EXCHANGE, INC., AND SIFMA, US EQUITIES AND RELATED STATISTICS (Dec. 1, 

2022), https://www.sifma.org/resources/research/us-equity-and-related-securities-statistics/us-

equities-and-related-statistics-sifma/.  Price volatility, as measured by the standard deviation of the 

price, is concave in time, which means that as a period of time increases, volatility will increase, 

but at a decreasing rate.  This suggests that the reduction in price volatility from moving from T+2 

settlement to T+1 settlement is larger than the reduction in price volatility from moving from T+3 

settlement to T+2 settlement.  These two facts suggest that the estimated reduction in clearing fund 

contributions would be more than $25 million per year. 

566  See Peter F. Christoffersen & Francis X. Diebold, How Relevant is Volatility Forecasting 

for Financial Risk Management?, 82 REV. ECON. & STAT. 12 (2000), 

http://www.mitpressjournals.org/doi/abs/10.1162/003465300558597#.V6xeL_nR-JA. The paper 

https://1library.net/document/ynm3kx1z-cost-benefit-analysis-of-shortening-the-settlement-cycle.html
https://1library.net/document/ynm3kx1z-cost-benefit-analysis-of-shortening-the-settlement-cycle.html
https://www.sifma.org/resources/research/us-equity-and-related-securities-statistics/us-equities-and-related-statistics-sifma/
https://www.sifma.org/resources/research/us-equity-and-related-securities-statistics/us-equities-and-related-statistics-sifma/
http://www.mitpressjournals.org/doi/abs/10.1162/003465300558597#.V6xeL_nR-JA


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Shortening the settlement cycle may reduce incentives for investors to trade excessively in 

times of high volatility.567  Such incentives exist because investors do not always bear the full cost 

of settlement risk for their trades.  Broker-dealers incur costs in managing settlement risk with 

CCPs.  Broker-dealers can set their fees so that they recover the average cost of risk management 

from their customers, but those fees depend on a variety of factors that impact settlement risk.  If a 

particular trade has above-average settlement risk, such as when market prices are unusually 

volatile, broker-dealers may not be able to adjust fees to reflect the higher marginal cost.  In 

extreme cases, broker-dealers may prevent a customer from trading.568  Shortening the settlement 

cycle reduces the cost of risk management and should reduce any such incentives to trade more 

than they otherwise would if they bore the full cost of settlement risk for their trades.   

The benefits of harmonized settlement cycles may also accrue to mutual funds.  As 

described above,569 transactions in mutual fund shares typically settle on a T+1 basis even when 

transactions in their portfolio securities settle on a T+2 basis.  As a result, there is a one-day 

mismatch between when these funds make payments to shareholders that redeem shares and when 

the funds receive cash proceeds for portfolio securities they sell.  This mismatch represents a 

source of liquidity risk for mutual funds.  Shortening the settlement cycle by one day will mitigate 

                                                 

shows that volatility can be predicted in the short run, and concludes that short run forecastable 

volatility would be useful for risk management practices. 

567  See Sam Schulhofer-Wohl, Externalities in Securities Clearing and Settlement: Should 

Securities CCPs Clear Trades for Everyone? (Fed. Res. Bank Chi. Working Paper No. 2021-02, 

2021). 

568  This occurred in January 2021 following heightened interest in certain “meme” stocks.  See 

T+1 Proposing Release, supra note 2, at 10438–39.; see also STAFF REPORT ON EQUITY AND 

OPTIONS MARKET STRUCTURE CONDITIONS IN EARLY 2021, at 31–35 (Oct. 14, 2021), 

https://www.sec.gov/files/staff-report-equity-options-market-struction-conditions-early-2021.pdf.   

569  See supra note 563; see also supra Part VIII.B.3. 

https://www.sec.gov/files/staff-report-equity-options-market-struction-conditions-early-2021.pdf


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the liquidity risk due to this mismatch.  As a result, mutual funds that settle on a T+1 basis may be 

able to reduce the size of cash reserves or the size of back up credit facilities that some currently 

use to manage liquidity risk from the mismatch in settlement cycles.  Further, mutual funds may be 

able to invest incoming cash more quickly when funds have net subscriptions, because the 

settlement time for the purchase of fund shares will be aligned with the settlement time for 

portfolio investments, thus allowing funds to maximize their exposure to their defined investment 

strategies. 

  Adoption of a T+1 standard settlement cycle could also have the second-order, longer-

term benefit to U.S. investors of incentivizing other jurisdictions to emulate U.S. markets in 

adopting a standard settlement time of T+1.  By virtue of U.S. capital markets’ prominent role in 

global finance, a transition to a shorter settlement cycle would act as an incentive for other 

jurisdictions to also compress their settlement times to match U.S. processing times.  This would 

be a product of non-U.S. jurisdictions’ desire to reduce transactions costs attendant to settlement 

mismatches.570  As a result, U.S. investors who deploy capital abroad would enjoy the benefits of 

compressed settlement times that the Commission has already described for the domestic T+1 

settlement framework: lower market, credit and liquidity risks; and additional capital efficiencies 

via lower margin and clearing fund deposit requirements.  In addition, a migration to T+1 in other 

jurisdictions would reduce the settlement mismatch costs described below in Part VIII.C.2. 

The Commission believes that these benefits are unlikely to be substantially mitigated by 

                                                 
570  See, e.g., ASSOCIATION FOR FINANCIAL MARKETS IN EUROPE, T+1 SETTLEMENT IN EUROPE: 

POTENTIAL BENEFITS AND CHALLENGES, at 4 (Sept. 2022), stating “Given that some major 

jurisdictions will be adopting T+1, the end users of capital markets – companies seeking to issue 

capital and consumers seeking to invest capital – may benefit from Europe following the same 

approach. This would also avoid a potential gap in the perceived competitiveness of European 

markets vis-à-vis its global peers.” 



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the exceptions to Rule 15c6-1(a) discussed in Part II.A.  Market participants that rely on Rule 

15c6-1(b) in order to transact in limited partnership interests that are not listed on an exchange or 

for which quotations are not disseminated through an automated quotation system of a registered 

securities association are likely to continue to rely on the exception after the Commission adopts 

the amendment to Rule 15c6-1(a).  Similarly, those that rely on the exemption from Rule 15c6-1 

for securities that do not have facilities for transfer or delivery in the U.S. are likely to continue to 

do so, as indicated by the public comments urging the Commission to retain this exemption.571  

There may be transactions covered by Rule 15c6-1(b) that in the past did not make use of this 

exception because they settled within two business days, but that may require use of this exception 

under the amendment to paragraph (a) of the rule because they require more than one business day 

to settle.  However, the Commission did not receive public comments on this point, and does not 

have data on whether transactions that previously did not make use of the exemption might now do 

so. 

Finally, the extent to which different types of market participants experience any benefits 

that stem from the amendment to Rule 15c6-1(a) may depend on their market power.  As discussed 

in the proposing release,572 the clearance and settlement system involves a number of 

intermediaries that provide a range of services between the ultimate buyer and seller of a security.  

Those market participants that have a greater ability to negotiate with customers or service 

providers may be able to retain a larger portion of the operational cost savings from a shorter 

settlement cycle than others, as they may be able to use their market power to avoid passing along 

the cost savings to their clients. 

                                                 
571  See discussion in sections II.B.5 and II.C.6.   

572  See T+1 Proposing Release, supra note 2, at 10439–44. 



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Although the Commission proposed deleting Rule15c6-1(c), it is instead, for the reasons 

discussed above, amending paragraph (c) of Exchange Act Rule 15c6-1 to shorten the settlement 

cycle for firm commitment offerings for securities that are priced after 4:30 p.m. ET, unless 

otherwise expressly agreed to by the parties at the time of the transaction.573 

As discussed in the proposing release, paragraph (c) is rarely used in the current T+2 

settlement environment, but the IWG expects a T+1 standard settlement cycle would increase 

reliance on paragraph (c).574  The Commission is persuaded by comments stating that a T+1 

settlement cycle is not sufficiently long enough to prevent firm commitment offerings priced after 

4:30 p.m. ET from failing to settle on time, and the Commission acknowledges that paragraphs (a) 

and (d) of Rule 15c6-1 would not allow parties to agree to a longer settlement cycle when 

circumstances, unforeseen at the time of the pricing of the transaction, arise that prevent settlement 

on T+1.  The Commission further acknowledges that, while paragraphs (a) and (d) allow parties to 

agree to a longer settlement cycle, in order for the parties to avail themselves of that extended 

settlement date, they must reach that agreement at the time of the transaction. 

The Commission believes that amending Rule 15c6-1(c) as discussed in Part II.C.4 above 

will realize the benefits of shortening the settlement cycle discussed above for the specific 

transactions covered by paragraph (c) while allowing an extra day to resolve issues unanticipated 

at the time of the transaction.  According to one commenter, it is not unusual for unanticipated 

issues relating to transfer agents, legend removal, local law matters (including local court 

                                                 
573  See T+1 Proposing Release, supra note 2, at 10449–50.  

574  T+1 Report, supra note 61, at 33–35. 



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approval), medallion guarantees or non-U.S. parties to arise.575  Such unanticipated issues could 

lead to increased failures to settle trades on a T+1 basis with respect to firm commitment offerings.   

In addition to the amendments to Rule 15c6-1(a) and (c), the Commission is adopting three 

rules applicable, respectively, to broker-dealers, investment advisers, and CMSPs to improve the 

efficiency of managing the processing of institutional trades under the shortened timeframes that 

will be available in a T+1 environment.  First, the Commission had proposed new Rule 15c6-2 to 

require that, where parties have agreed to engage in an allocation, confirmation, or affirmation 

process, a broker or dealer would be prohibited from effecting or entering into a contract for the 

purchase or sale of a security (other than an exempted security, a government security, a municipal 

security, commercial paper, bankers’ acceptances, or commercial bills) on behalf of a customer, 

unless such broker or dealer has entered into a written agreement with the customer that requires 

the allocation, confirmation, affirmation, or any combination thereof, be completed as soon as 

technologically practicable and no later than the end of the day on trade date in such form as may 

be necessary to achieve settlement in compliance with Rule 15c6-1(a).576  The Commission is 

adopting a modified new Rule 15c6-2 that, in addition to technical changes,577 and for the reasons 

discussed in Part III.C.2 above, modifies the proposed rule by adding a new paragraph (a), under 

which a broker-dealer can determine either to enter into written agreements, or establish, maintain, 

and enforce written policies and procedures reasonably designed to ensure completion of the 

allocation, confirmation, affirmation, or any combination thereof, for a transaction as soon as 

                                                 
575  See supra Part II.B.3. for detailed description of comment letters urging the Commission to 

adopt a T+2 settlement cycle for firm commitment offerings for securities that are priced after 4:30 

p.m. ET, unless otherwise expressly agreed to by the parties at the time of the transaction. 

576  See T+1 Proposing Release, supra note 2, at 10453; see also supra Part III.A. 

577  See supra Part III.C.1. 



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technologically practicable, and no later than the end of the day on trade date, in such form as 

necessary to achieve settlement.   

The Commission believes that implementing a T+1 standard settlement cycle, as well as 

any potential further shortening beyond T+1, will necessitate increases in same-day affirmation 

rates because same-day affirmations will be critical to achieving timely T+1 settlement.578  In this 

way, the Commission also believes that new Rule 15c6-2 should facilitate timely settlement as a 

general matter because it will accelerate the transmission and affirmation of trade data to trade 

date, improving the accuracy and efficiency of institutional trade processing, and reducing the 

potential for settlement failures.  The Commission further anticipates that proposed Rule 15c6-2 

will likely stimulate further development of automated and standardized practices among market 

participants more generally, particularly those that currently rely on manual processes to achieve 

settlement.   

Although same-day affirmation is considered a best practice for institutional trade 

processing, this practice is not universal across market participants or even across all trades entered 

by a given participant.579  As discussed in Part VIII.B above, the collection of redundant, often 

manual steps and the use of uncoordinated (i.e., not standardized) databases can lead to delays, 

exceptions processing, settlement fails, wasted resources, and economic losses.  The Commission 

believes that proposed Rule 15c6-2 should increase the percentage of trades that achieve an 

                                                 
578 See supra note 262. 

579  See supra Part III.B.1. for a discussion of comments that argue that commercial incentives 

to achieve timely trade allocations, confirmations, and affirmations already exist.  Although the 

Commission agrees that the incentives identified by commenters exist and help ensure timely 

settlement, the Commission believes that these incentives alone are insufficient to significantly 

improve same-day affirmation rates, as required to facilitate shortening the standard settlement 

cycle to T+1. 



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affirmed confirmation on trade date and should help facilitate an orderly transition to T+1.  

Proposed Rule 15c6-2 would also improve the efficiency of the settlement cycle by incentivizing 

market participants to commit to operational and technological upgrades that facilitate same-day 

affirmation to eliminate, among other things, manual operations, while also reducing operational 

risk, discouraging the use of “just in time” solutions, and promoting readiness for shortening the 

settlement cycle.580   

Second, the Commission is amending the recordkeeping obligations of investment advisers 

to ensure that they are properly documenting their related allocations and affirmations, as well as 

the confirmations they receive from their broker-dealers.581  The amendment to Rule 204-2 

requires advisers to time and date stamp records of any allocation and each affirmation with 

respect to any securities transaction that is subject to the requirements of Rule 15c6-2(a).  The 

Commission believes that the timing of communicating allocations to the broker or dealer is a 

critical pre-requisite to help ensure that confirmations can be issued in a timely manner, and 

affirmation is the final step necessary for an adviser to acknowledge agreement on the terms of the 

trade or alert the broker or dealer of a discrepancy.  The Commission believes the recordkeeping 

requirements should help establish that obligations to achieve a matched trade have been met.  

Requiring the retention of these records also is important for the Commission staff’s use in its 

regulatory and examination program and will be helpful for the Commission to monitor the 

transition from T+2 to T+1.  Moreover, the amendments to Rule 204-2 are intended to reduce risk 

following the transition to T+1 by improving affirmation rates.   

                                                 
580  See discussion in section III.B.5. and supra note 294 and accompanying text. 

581  See supra Part IV.C. 



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Finally, the Commission is adopting a requirement for CMSPs to establish, implement, 

maintain, and enforce written policies and procedures reasonably designed to facilitate straight-

through processing.582  Under the rule, a CMSP facilitates straight-through processing when its 

policies and procedures enable its users to minimize, to the greatest extent that is technologically 

practicable, the need for manual input of trade details or manual intervention to resolve errors and 

exceptions that can prevent settlement of the trade.583   

The Commission believes that increasing the usage of CMSPs can reduce costs and risks 

associated with processing institutional trades and improve the efficiency of the national clearance 

and settlement system.584  CMSPs have become increasingly connected to a wide variety of market 

participants in the U.S. and elsewhere,585 increasing the need to reduce risks and inefficiencies that 

may result from use of a CMSPs’ systems.  The Commission believes the new rule will better 

position CMSPs to provide services that not only reduce the risk inherent in manual processing, 

but also help facilitate an orderly transition to a T+1 standard settlement cycle, as well as potential 

further shortening of the settlement cycle in the future.586  The new requirement supports some of 

the benefits derived from a shortening of the settlement cycle, and mitigates any subsequent 

                                                 
582  See supra Part V.C.; see also T+1 Proposing Release, supra note 2, at 10458 (further 

discussing the term “straight-through processing”). 

583  See T+1 Proposing Release, supra note 2, at 10458. 

584  See supra note 539 and accompanying discussion of processing errors.   

585  See DTCC, About DTCC Institutional Trade Processing, 

https://www.dtcc.com/about/businesses-and-subsidiaries/dtccitp (noting that DTCC ITP, parent to 

DTCC ITP Matching, serves 6,000 financial services firms in 52 countries).  

586  See supra Part V.C. for related discussion.  

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potential increase in fails that may be caused by the reduced time to remediate any errors in trades. 

New Rule 17Ad-27 also requires a CMSP to submit every twelve months to the 

Commission a report that describes the following: (i) a summary of the CMSP’s current policies 

and procedures for facilitating straight-through processing;587 (ii) a qualitative description of its 

progress in facilitating straight-through processing during the twelve month period covered by the 

report;588 (iii) a quantitative presentation of data that includes six specified sets of data;589 (iv) 

requirements concerning quantitative data organization and categorization;590 and (v) the steps the 

CMSP intends to take to facilitate and promote straight-through processing during the twelve 

month period that follows the period covered by the report.591  The new requirement also informs 

                                                 
587  See supra Part V.C.2.a). 

588  See supra Part V.C.2.b). 

589  See supra Part V.C.2.c).  Specifically, Rule 17Ad-27(b)(3) requires the CMSP to provide 

data that includes (i) the total number of trades submitted to the clearing agency for processing; (ii) 

the total number of allocations submitted to the clearing agency; (iii) the total number of 

confirmations submitted to the clearing agency, as well as the total number of confirmations 

cancelled by a user; (iv) the percentage of confirmations submitted to the clearing agency that are 

affirmed on trade date, specifying to the extent practicable the time of affirmation on trade date; 

(v) the percentage of allocations and confirmations submitted to the clearing agency that are 

matched and automatically confirmed through the clearing agency’s services; and (vi) metrics 

concerning the use of manual and automated processes by the CMSP’s users with respect to the 

CMSP’s services that may be used to assess progress in facilitating STP. 

590  See supra Part V.C.2.d).  Specifically, Rule 17Ad-27(b)(4) requires the CMSP to submit, 

pursuant to paragraph (b)(4), the data sets required under paragraph (b)(3) of the new rule and 

which must be:  (i) organized on a month-by-month basis beginning with January of each year, for 

the twelve months covered by the report required under paragraph (b) of the rule; (ii) separated, 

where applicable, between the use of central matching and electronic trade confirmation services 

offered by the clearing agency; (iii) separated, as appropriate, by asset class; (iv) separated by type 

of user; and (v) presented on an anonymized and aggregated basis. 

591  See supra Part V.C.2.e). 



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the Commission and the public, particularly the direct and indirect users of the CMSP, as to the 

progress being made each year to advance implementation of straight-through processing with 

respect to the allocation, confirmation, affirmation, and matching of institutional trades, the 

communication of messages among the parties to the transactions, and the availability of service 

offerings that reduce or eliminate the need for manual processing.   

New Rule 17Ad-27 requires the CMSP to file the report on EDGAR using Inline XBRL, a 

structured (machine-readable) data language.592  The Commission does not currently require 

CMSPs to provide the specific disclosures set forth in Rule 17Ad-27, but CMSPs may provide 

disclosures related to straight-through processing as part of Exhibit J or Exhibit S to their 

exemption applications (or updates thereto) on Form CA-1.593  These disclosures are not centrally 

filed on an electronic database, nor are they machine-readable; instead, clearing agencies are 

required to mail four completed copies of Form CA-1 to the Commission’s headquarters.594 

Requiring a centralized filing in EDGAR using location and a machine-readable data 

language for the reports facilitates access, retrieval, analysis, and comparison of the disclosed 

straight-through processing information across different CMSPs and time periods by the 

                                                 
592  See supra Part V.C.4. 

593  In the past, applicants have discussed on the Form CA-1 application how their services 

might relate to the overall objective of straight-through processing.  See, e.g., Bloomberg STP LLC 

Form CA-1 (Jan. 21, 2015), https://www.sec.gov/rules/other/2015/34-74394-form-ca-1.pdf.  

Exhibit J to Form CA-1 requires clearing agencies to provide narrative descriptions of each service 

or function performed by the registrant.  Exhibit S to Form CA-1 requires a statement 

demonstrating why the granting of an exemption from registration as a clearing agency would be 

consistent with the public interest, the protection of investors and the purposes of section 17A of 

the Act, including the prompt and accurate clearance and settlement of securities transactions and 

the safeguarding of securities and funds. 

594  See Instruction I.2. to Form CA-1. 

https://www.sec.gov/rules/other/2015/34-74394-form-ca-1.pdf


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Commission and the public, thus potentially augmenting the informational benefits of the report 

requirement.   

2. Costs 

The Commission believes that compliance with a T+1 standard settlement cycle will 

involve initial fixed costs to update systems and processes.595  The Commission does not have all 

of the data necessary to form its own firm-level estimates of the costs of updates to systems and 

processes, as the types of data needed to form these estimates are difficult or impossible for the 

Commission to collect.  However, the Commission has used inputs provided by industry studies 

discussed in this release to quantify these costs to the extent possible in Part VIII.C.5.  In the 

proposing release, the Commission encouraged commenters to provide any additional or more 

current information or data on the costs to market participants of the proposed rule.  Information 

received in public comments has informed this analysis.   

The operational cost burdens associated with the amendment to Rule 15c6-1(a) for 

different market participants may vary depending on each market participant’s degree of direct or 

indirect inter-connectivity to the clearance and settlement process, regardless of size.  For example, 

market participants that internally manage more of their own post-trade processes directly incur 

more of the upfront operational costs associated with the amendment to Rule 15c6-1(a), because 

they are required to directly undertake more of the upgrades and testing necessary for a T+1 

                                                 
595  Industry sources have suggested some updates to systems and processes might yield 

operational cost savings after the initial update.  For example, the T+1 Report stated that “[w]hile 

there may be … up-front implementation costs to transition the industry to T+1, the industry 

foresees long-term cost reduction for market participants, and by extension, costs borne by end 

investors, given the benefits of moving to T+1 settlement.”  T+1 Report, supra note 61, at 9; see 

infra Part VIII.C.5.a). for industry estimates of      the costs and benefits of the proposed amendment 

to Rule 15c6-1(a). 

 



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standard settlement cycle.  As mentioned in Part II.B of the proposing release, other market 

participants might outsource the clearance and settlement of their transactions to third-party 

providers of back-office services.  The exposures to the operational costs associated with 

shortening the standard settlement cycle should be indirect to the extent that third-party service 

providers pass through the costs of infrastructure upgrades to their customers.  The degree to 

which customers bear operational costs depends on their bargaining position relative to third-party 

providers.  Large customers with market power may be able to avoid internalizing these costs, 

while small customers in a weaker negotiation position relative to service providers may bear the 

bulk of these costs.  In either case, to the extent that the costs of infrastructure upgrades are fixed, 

the distribution of the cost burden across many customers of the third-party service provider 

implies that the costs to each individual customer is likely to be less than if they did not outsource 

the clearance and settlement of their transactions. 

Further, changes to initial and ongoing operational costs may make some self-clearing 

market participants alter their decision to continue internally managing the clearance and 

settlement of their transactions.  Entities that currently internally manage their clearance and 

settlement activity may prefer to restructure their businesses to rely instead on third-party 

providers of clearance and settlement services that may be able to amortize the initial fixed cost of 

upgrade across a much larger volume of transaction activity. 

In addition, the shortening of the settlement cycle may increase the need for some market 

participants engaging in cross-border and cross-asset transactions to hedge risks stemming from 

mismatched settlement cycles and differences in time zones, resulting in additional costs.  For 

example, as discussed in Part II.B.1 above, a comment letter submitted by an industry association 

representing the alternative investment industry stated that the T+1 Proposing Release “raises 



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considerable risks for asset managers with primary or significant exposure to markets that will 

remain at T+2.”596  The commenter’s letter references specifically “misalignment concerns” 

relating to FX settlement risk, international banking and coordination issues, and 

collateral/liquidity risk.597   

One commenter stated that because FX transactions largely settle on a T+2 basis, market 

participants that seek to fund a cross-border securities transaction with the proceeds of an FX 

transaction would be required to settle the securities transaction before the proceeds of the FX 

transaction become available and pre-fund these securities transactions, which would potentially 

adversely impact client performance and increase operating and settlement risk for advisers.598  

The commenter said that, while both domestic and internationally based investment advisers would 

be impacted by these issues, non-U.S.-based investment advisers would face additional expenses 

because they would need to set up an FX trading and settlement presence in the U.S., or add staff 

abroad to create, execute, and settle FX transactions to meet a T+1 timeline.599  Although there 

currently exists misalignment of settlement cycles across asset classes and as a result of time zone 

differences, the Commission agrees that misalignment introduced by the rule amendment being 

                                                 
596  See supra note 31. 

597  See supra note 34. 

598  IAA October Letter, supra note 222, at 4.  The commenter also suggested certain actions 

the Commission could take to reduce disruption in FX markets.  See supra note 41. 

599  IAA October Letter, supra note 222, at 4 (suggesting certain actions the Commission could 

take to reduce disruption in FX markets, such as by (i) working with other regulators and market 

participants to support the move to T+1 by, among other things, modifying the FX and equity 

trading day(s) in the U.S., and (ii) “allow[ing] for a mismatch of FX settlement dates as a valid 

reason for T+2 settlement arrangements without it breaching an investment adviser’s best 

execution obligation”). 



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adopted will likely present some challenges for, and increase costs for, certain market participants, 

including asset managers.600  For example, as discussed in the proposing release, under the T+1 

settlement cycle, a market participant selling a security in European equity markets to fund a 

purchase of securities in U.S. markets would face a one day lag between settlement in Europe and 

settlement in the U.S.  The market participant could choose between bearing an additional day of 

market risk in the U.S. trading markets by delaying the purchase by a day, or funding the purchase 

of U.S. shares with short-term borrowing.  Additionally, because the FX market has a T+2 

settlement cycle,601 the market participant will also be faced with a choice between bearing an 

additional day of currency risk due to the need to sell foreign currency as part of the transaction, or 

incurring the cost related to hedging away this risk in the forward or futures market. 

Another commenter stated that if the U.S. settlement cycle is shortened to T+1 while other 

major global financial centers remain on a T+2 settlement cycle, “there will be increased 

operational cost and significant settlement risks associated with multi-leg cross border 

transactions.”602  This commenter further stated that it expects mismatched settlement cycles 

would result in increased financing costs associated with transactions in which a U.S. market 

participant is selling to a cross-border participant because “we will be forced to receive (and pay 

                                                 
600  See Part II.C.1. (discussing challenges and costs associated with the misalignment of 

securities and FX settlement cycles). 

601  See, e.g., CME, CME Rulebook Chapter 13, at 3, 

https://www.cmegroup.com/content/dam/cmegroup/rulebook/CME/I/13.pdf (“Spot FX 

Transaction means a currency purchase and sale that is bilaterally settled by the counterparties via 

an actual delivery of the relevant currencies within two Business Days.”).  U.S. and Canadian 

dollar spot FX transactions settle on the next business day.  Id. at 5–6.  

602  See supra note 43. 

https://www.cmegroup.com/content/dam/cmegroup/rulebook/CME/I/13.pdf


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for) a securities position on T+1 for the U.S. leg, but generally be unable to onward deliver the 

position on the foreign leg until T+2.”603  This commenter also stated its expectation that 

mismatched settlement cycles will result in a significant number of settlement fails, that the 

increase in financing costs and settlement fails in connection with cross-border transactions may 

force broker-dealers to decrease or cease offering cross-border services to their clients, that any 

decrease or cessation of cross-border trading ultimately will reduce liquidity for U.S. investors.604 

Another commenter stated that the shortened settlement cycle in conjunction with time 

zone differences between markets may not allow sufficient time for investment advisers to match 

foreign currency amount to settle all trades on T+1.605  In the context of discussing potential 

exemptions to 15c6-1, another commenter stated that settling trades with different time zones is 

already a difficult process and accelerating the settlement cycle for these securities would make 

cross-border transactions even more challenging.606 

Commenters also stated that the misalignment of settlement cycles between U.S. securities 

and non-U.S. securities will impact U.S. securities that are exchangeable for a foreign security or a 

basket including foreign securities.607  The commenter highlighted in particular ADRs, and ETFs 

with an underlying basket that includes foreign securities, which according to the commenter, 

                                                 
603  Id. 

604  Id. 

605  See supra note 50.  This commenter also suggested certain “options” for actions that could 

be taken to reduce disruption in the FX markets.  See supra Part II for a discussion of these 

options. 

606  See supra note 107. 

607  See SIFMA April Letter, supra note 15, at 8. 



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illustrate this misalignment.608  The commenter stated that market makers and other market 

participants may purchase foreign shares and sell related ADRs in the U.S. on the same trading 

day, and thus timely settle the sale of the ADRs using the newly created ADRs.609  According to 

the commenter, this type of trade will not be possible if the underlying foreign shares settle on T+2 

and the related ADR is required to settle on T+1.610  The result, the commenter stated, is likely to 

be wider bid-ask spreads for the ADR because market makers must take into account the additional 

cost of borrowing securities and other financing costs to avoid settlement failures.611  Additionally, 

the commenter argued, the incidence of fails would likely increase as a result of the misaligned 

settlement cycles, particularly where it is not possible to borrow securities to make delivery, and a 

knock-on effect could be to increase the incidence of buy-ins as well.612   

Separately, the same commenter argued that the ETF creation/redemption process is 

impacted by the misalignment of global securities transaction settlement cycles where the basket of 

securities underlying an ETF includes foreign securities.613  A second commenter stated that the 

misalignment in settlement cycles between the U.S. and foreign jurisdictions that continue to settle 

on a T+2 basis, coupled with time zone differences, may increase certain risks, such as failed 

                                                 
608  See id. 

609  See SIFMA April Letter, supra note 16, at 8. 

610  See id. 

611  See id. 

612  See id. 

613  See id. and referencing text for a discussion of settlement cycle misalignment on the create 

and redeem process for ETFs that include securities not traded in the U.S. 



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trades, accrual differences, net asset value miscalculations, and investment guideline breaches.614  

The same commenter stated that due to the resulting misalignment in settlement cycles between 

the U.S. and foreign markets upon transitioning to T+1, an ADR provider may incur borrowing 

and other costs related to the underlying foreign security to facilitate T+1 settlement of the 

ADR.615  According to the commenter, these costs would likely be passed down to investors and 

thus make it more expensive to obtain investment exposure to foreign markets.616 

The Commission understands that variation in the length of the settlement cycle across 

asset classes and jurisdictions and variation in time zone introduce certain risks and costs on 

investors, broker-dealers, custodians, and other market participants,617 but the Commission notes 

that currently and in the recent past settlement cycles have varied across asset classes and 

jurisdictions.  The Commission further understands that the financial services industry has 

managed the challenges provided by these settlement cycle mismatches and time zone differences 

between markets albeit at some cost.618   Our information on these costs is limited regarding how 

firms will overcome the specific challenges identified by certain commenters.  If other 

                                                 
614  See supra note 122. 

615  See id. 

616  See id. 

617  See supra Part II.C.1. for a discussion of the Commission’s recognition of the challenges 

and costs associated with the prospective misalignment of settlement cycles, the Commission 

actions suggested by commenters, and examples of actions market participants may take in order 

to mitigate those challenges and costs. 

618  For example, during periods of heightened uncertainty it is common for some investors to 

sell equities, including foreign equities, and invest in U.S. Treasury securities (which generally 

settle on T+1).  Such a trade would include many of the issues cited by commenters including 

differences in time zones, currency, and settlement cycle. 



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jurisdictions subsequently follow the U.S. in shortening the settlement cycle, however, many of the 

additional costs will only be incurred during that interval.619  In addition, the Commission 

understands that solutions to specific challenges may still need to be worked out by the affected 

industry participants and that those solutions may require additional costs to overcome.   

The way that different market participants will likely bear costs as a result of the 

amendment to Rule 15c6-1(a) may also vary based on their business structure.  For example, a 

shorter standard settlement cycle will require payment for securities that settle regular-way by T+1 

rather than T+2.  Generally, regardless of current funding arrangements between investors and 

broker-dealers, removing one business day between execution and settlement will mean that 

broker-dealers could choose between requiring investors to fund the purchase of securities one 

business day earlier, while extending the same level of credit they do under T+2 settlement, or 

providing an additional business day of funding to investors.620  In other words, broker-dealers 

could pass through some of the costs of a shorter standard settlement cycle by imposing the same 

shorter cycle on investors, or they could pass these costs on to investors by raising transactions 

fees to compensate for the additional business day of funding the broker-dealer may choose to 

provide.  The extent to which these costs get passed through to customers may depend on, among 

other things, the market power of the broker-dealer.  Generally, if a broker-dealer does not face 

significant competition, it will have an incentive to absorb part of the cost increase.  On the other 

                                                 
619  See supra Part VIII.C.1. 

620  The direct cost of such a delay would be the one-day borrowing cost of the market 

intermediary providing the extra day of financing or the opportunity cost of funds to the investor 

times the value of the transaction.  Such funding and opportunity costs will vary across investors, 

intermediaries, and time.  



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hand, in the extreme case of a perfectly competitive market, there are no economic profits and 

price equals marginal costs so an increase in cost could be fully passed through to the customer.621     

However, broker-dealers that predominantly serve retail investors may experience the costs 

of an earlier payment requirement differently from broker-dealers with more institutional clients or 

large custodian banks because of the way retail investors fund their accounts.  Retail investors may 

find it difficult to accelerate payments associated with their transactions, which may cause broker-

dealers, who are unwilling to extend additional credit to retail investors, to instead require that 

these investors pre-fund their transactions.622  These broker-dealers may also experience costs 

unrelated to funding choices.  For instance, retail investors may require additional or different 

services such as education regarding the impact of the shorter standard settlement cycle. 

Finally, a shorter settlement cycle may result in higher costs associated with liquidating a 

defaulting member’s position, as a shorter horizon may result in larger price impacts, particularly 

for less liquid assets.  For example, when a clearing member defaults, NSCC is obligated to fulfill 

its trade guarantee with the defaulting member’s counterparty.  One way it accomplishes this is by 

liquidating assets from clearing fund contributions from clearing members.  However, liquidating 

assets in shorter periods of time can have larger adverse impacts on the prices of the assets.  

                                                 
621  More specifically, the market clearing quantity of the good or service supplied will adjust 

and the extent of industry-wide cost pass-through in a perfectly competitive market depends on the 

elasticity of demand relative to supply.  The more elastic is demand, and the less elastic is supply, 

the smaller the extent of pass-through, all else being equal.  See RBB Economics, COST PASS-

THROUGH: THEORY, MEASUREMENT AND POTENTIAL POLICY IMPLICATIONS, A REPORT PREPARED 

FOR THE OFFICE OF FAIR TRADING, at 4 (Feb. 2014) 

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/

320912/Cost_Pass-Through_Report.pdf. 

622  See infra Part VIII.C.5.b)(3) for additional discussion regarding retail investors and their 

broker-dealers. 



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Shortening the standard settlement cycle from two business days to one business day could reduce 

the amount of time that NSCC has to liquidate its assets, which may exacerbate the price impact of 

liquidation. 

As discussed above, the Commission is amending the recordkeeping obligations of 

investment advisers with respect to any securities transaction that is subject to the requirements of 

Rule 15c6-2(a) to require advisers to make and keep records of their related allocations and 

affirmations sent or received, as well as the confirmations they receive.623  The amendment to Rule 

204-2 requires advisers to time and date stamp records of any such allocation and affirmation.  The 

Commission recognizes, however, that requiring these records, and adding time and date stamps to 

records, will add additional costs and burdens for those advisers that do not currently make and 

keep these records, or do not use electronic systems to send allocations and affirmations to brokers 

or dealers, or retain confirmations.624  For example, some advisers may incur costs to update their 

processes to accommodate these records. 

3. Economic Implications through Other Commission Rules 

As noted in Part III.E of the T+1 proposing release, the amendment to Rule 15c6-1(a), by 

shortening the standard settlement cycle, could have an ancillary impact on the means by which 

market participants comply with existing regulatory obligations that relate to the settlement 

timeframe.  The Commission also provided illustrative examples of specific Commission rules that 

                                                 
623  See supra Part IV.C. 

624  A commenter sought clarification regarding an adviser’s ability to rely on third parties to 

meet its recordkeeping obligations for allocations, confirmations, and affirmations. See supra note 

304 and accompanying text.  As discussed above in Part IV.C., the Commission is confirming that 

an adviser may rely on a third party to make and keep the required records, although using a third 

party to make and keep records does not reduce an adviser’s obligations under Rule 204-2. 



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include such requirements or are otherwise reference the settlement date, including Regulation 

SHO,625 and certain provisions included in the Commission’s financial responsibility rules.626  The 

Commission invited and received public comment on these effects, and these comments are 

discussed in detail in Part VI.  Those public comments inform this analysis, but did not provide 

information the Commission could use to quantify the ancillary economic impact the amendments 

and new rules might have on how market participants comply with other Commission rules.   

Financial markets and regulatory requirements have evolved significantly since the 

Commission adopted Rule 15c6-1 in 1993.  Market participants have responded to these 

developments in diverse ways, including implementing a variety of systems and processes, some 

of which may be unique to specific market participants and their businesses, and some of which 

may be integrated throughout business operations of certain market participants.  Because of the 

broad variety of ways in which, depending on their particular circumstances, market participants 

currently satisfy regulatory obligations pursuant to Commission rules, it is difficult to identify 

particular practices that may be specific to a single or group of market participants will need to 

change in order to meet these other obligations.  In this case, the Commission is unable to quantify 

the ancillary economic impact that the amendment to Rule 15c6-1(a) will have on how market 

participants comply with other Commission rules.  As above, the Commission invited commenters 

to provide quantitative and qualitative information about these potential economic effects.  These 

comments are discussed in in detail in Part VI above and inform this analysis.   

                                                 
625  17 CFR 242.200 through 242.204. 

626  See T+1 Proposing Release, supra note 2, at 10462–63; see also supra Parts VI.A. and VI.C. 

(discussing comments received). The Commission also solicited comment on the impact of 

shortening the settlement cycle on compliance with Rule 10b-10 under the Exchange Act and 

broker-dealer obligations with regard to prospectus delivery.  See T+1 Proposing Release, supra 

note 2, at 10463–64; see also supra Parts VI.B. and VI.C. (discussing comments received). 



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In certain cases, based on information about current market practices, the Commission 

believes that the amendment to Rule 15c6-1(a) will be unlikely to change the means by which 

market participants comply with existing regulatory requirements.  In these cases, the Commission 

believes that market participants will not incur significant increased costs of compliance from such 

regulatory requirements from shortening the settlement cycle to T+1. 

In other cases, however, the amendment may incrementally increase the costs associated 

with complying with other Commission rules, where such rules potentially require broker-dealers 

to engage in purchases of securities.  Two examples of these types of rules are Regulation SHO 

and the Commission’s financial responsibility rules.  In most instances, Regulation SHO governs 

the timeframe in which a “participant” of a registered clearing agency must close out a fail to 

deliver position by purchasing or borrowing securities.627  Similarly, some of the Commission’s 

financial responsibility rules relate to actions or notifications that reference the settlement date of a 

transaction.  For example, Exchange Act Rule 15c3-3(m)628 uses the settlement date to prescribe 

the timeframe in which a broker-dealer must complete certain sell orders on behalf of customers.  

As noted above, the term “settlement date” is also incorporated into paragraph (c)(9) of Rule 15c3-

1,629 which explains what it means to “promptly transmit” funds and “promptly deliver” securities 

within the meaning of paragraphs (a)(2)(i) and (a)(2)(v) of Rule 15c3-1.  As explained above, the 

concepts of promptly transmitting funds and promptly delivering securities are incorporated in 

                                                 
627  See T+1 Proposing Release, supra note 2, at 10461–62.    

628  17 CFR 240.15c3-3(m). 

629  17 CFR 240.15c3-1(c)(9). 



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other provisions of the financial responsibility rules.630  Under the amendment to Rule 15c6-1(a), 

the timeframes included in these rules will be one business day closer to the trade date. 

The Commission believes that shortening these timeframes should not materially affect the 

costs that broker-dealers incur to meet their Regulation SHO obligations and obligations under the 

Commission’s financial responsibility rules.631  Nevertheless, the Commission acknowledges that a 

shorter settlement cycle could affect the processes by which broker-dealers manage the likelihood 

of incurring these obligations.  For example, broker-dealers may currently have in place inventory 

management systems that help them avoid failing to deliver securities by T+2.  Broker-dealers will 

likely incur costs in order to update these systems to support a shorter settlement cycle. 

In cases where market participants will need to adjust the way in which they comply with 

other Commission rules, the magnitude of the costs associated with these adjustments is difficult to 

quantify.  As noted above, market participants employ a wide variety of strategies to meet 

regulatory obligations.  For example, broker-dealers may ensure that they have securities available 

to meet their obligations by using inventory management systems, or they may choose instead to 

borrow securities.  An estimate of costs is further complicated by the possibility that market 

participants could change their compliance strategies in response to a shorter standard settlement 

cycle. 

As with the T+2 transition, the Commission anticipates that the transition to T+1 will again 

require changes to SRO rules and changes to the operations or market participants subject to those 

                                                 
630  See, e.g., 17 CFR 240.15c3-1(a)(2)(i) and (v); 17 CFR 240.15c3-3(k)(1)(iii) and (k)(2)(i) 

and (ii); 17 CFR 240.17a-5(e)(1)(i)(A); 17 CFR 240.17a-13(a)(3). 

631  See supra Parts VI.A. (Regulation SHO) and VI.C. (Financial Responsibility Rules for 

Broker-Dealers) for a discussion of commenters concerns and the reasons why the Commission 

believes that costs should not be materially affected. 



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rules to achieve consistency with a T+1 standard settlement cycle.  Certain SRO rules reference 

existing Rule 15c6-1 or currently define “regular way” settlement as occurring on T+2 and, as 

such, may need to be amended in connection with shortening the standard settlement cycle to T+1.  

Certain timeframes or deadlines in SRO rules also may refer to the settlement date, either 

expressly or indirectly.  In such cases, the SROs may need to amend these rules in connection with 

shortening the settlement cycle to T+1.632 

The Commission invited commenters to provide quantitative and qualitative information 

about the impact of the amendment to Rule 15c6-1(a) on the costs associated with compliance with 

other Commission rules.  Although several commenters raised issues related to SRO rules and 

operations,633 no commenters provided quantitative information about the impact of the rules and 

rule amendments being adopted on the costs associated with compliance with other Commission 

rules or SRO rules. 

4. Effect on Efficiency, Competition, and Capital Formation 

In response to the T+1 Proposing Release, the Commission received numerous comment 

letters supporting a shorter settlement cycle for securities transactions citing positive effects of the 

proposed rule on efficiency, competition, and capital formation.  One commenter stated that the 

Commission’s proposal to shorten the settlement cycle is an example of an initiative aimed at 

introducing more efficiency to the marketplace while reducing risks for investors and other market 

                                                 
632  The T+1 Report similarly indicates that SROs will likely need to update their rules to 

facilitate a transition to a T+1 standard settlement cycle.  T+1 Report, supra note 61, at 35. 

633  See supra Part VI.E. 



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participants.634  Another commenter noted that shortening the current settlement cycle would 

improve capital and operational efficiencies.635  Another commenter cited benefits of the proposed 

rule including enhanced efficiency of the equity markets and better use of capital.636  Another 

commenters stated that the proposed rule may improve capital efficiency and may increase 

competition.637  A commenter also noted that the “reasonably designed” standard for policies and 

procedures fosters innovation and encourages competition by enabling each registrant to adopt 

compliance methodologies aligned to its role and capabilities.638  While discussing changes 

necessary to implement a shorter settlement cycle, a commenter noted that the settlement process 

would be modernized to remove dependencies on manual processes and facilitate straight-through 

processing utilizing technology to achieve a more robust process which would reduce risks and 

remove impediments to an efficient settlement process.639 

Market participants may incur initial costs for the investments necessary to comply with a 

                                                 
634  See Virtu Financial Letter, supra note 16, at 5. 

635  See Cornell Law Letter, supra note 16, at 3; see also RMA Letter, supra note 16, at 3, 

stating that “We further agree that acceleration of the standard settlement cycle to T+1 could 

increase the efficiency of capital market transactions and reduce systemic risk.” See also NYSE 

Group Letter, supra note 16, at 1, stating that “A T+1 settlement cycle will significantly increase 

market efficiency, mitigate risk (particularly during times of extreme volatility and stressed 

markets) and free up liquidity - cash or shares - held to ensure the completion of trades. This will 

allow industry participants to take advantage of capital and operational efficiencies, and benefit 

from significant risk reduction and a potential lowering of margin requirements.” 

636  See MMI Letter, supra note 16, at 2. 

637  See Wilson-Davis Letter, supra note 16, at 5-6. 

638  See OCC Letter, supra note 16, at 3. 

639  See Jeffrey S. Davis, Senior Vice President, Senior Deputy General Counsel, Nasdaq (April 

11, 2022) (“Nasdaq Letter”), at 2. 



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shorter standard settlement cycle.640  However, these costs are likely to differ across market 

participants, and these differences may exacerbate coordination problems.  First, per-transaction 

operational costs clearing members incur in connection with the clearing services they provide 

may be higher for members that clear fewer transactions than such costs are for members that clear 

a higher volume of transactions.  Thus, the extent to which many of the upgrades necessary for a 

T+1 standard settlement cycle are optimal for a member to adopt unilaterally may depend, in part, 

on the transaction volume cleared by such member.  For example, certain upgrades necessary for a 

T+1 standard settlement cycle may result in economies of scale, where large clearing members are 

able to comply with the amendment to Rule 15c6-1(a) at a lower per-transaction cost than smaller 

members.  As a result, larger members might take a short time to recover their initial costs for 

upgrades; smaller members with lower transaction volumes might take longer to recover their 

initial cost outlays and might be more reluctant to make the upgrades in the absence of the 

amendment.  These differences in cost per transaction may be mitigated through the use of third-

party service providers. 

In addition, the Commission acknowledges that the upgrades necessary to implement a 

shorter standard settlement cycle may produce indirect economic effects.  We analyze some of 

these indirect effects, such as the impact on competition and third-party service providers, in the 

following section.   

A shorter settlement cycle might improve the efficiency of the clearance and settlement 

process through several channels.  First, the Commission believes that the primary effect that a 

shorter settlement cycle will have on the efficiency of the settlement process will be a reduction in 

                                                 
640  See supra Part VIII.C.2. 



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the credit, market, and liquidity risks that broker-dealers, CCPs, and other market participants are 

subject to during the standard settlement cycle.641  A shorter standard settlement cycle will 

generally reduce the volume of unsettled transactions that could potentially pose settlement risk to 

counterparties.  Shortening the period between trade execution and settlement should enable trades 

to be settled with less aggregate risk to counterparties or the CCP.  A shorter standard settlement 

cycle may also decrease liquidity risk by enabling market participants to access the proceeds of 

their transactions sooner, which may reduce the cost market participants incur to handle 

idiosyncratic liquidity shocks (i.e., liquidity shocks that are uncorrelated with the market).  That is, 

because the time interval between a purchase/sale of securities and payment is reduced by one 

business day, market participants with immediate payment obligations that they could cover by 

selling securities will be required to obtain short-term funding for one less day.642  As a result of 

reduced cost associated with covering their liquidity needs, market participants may, under 

particular circumstances, be able to shift assets that would otherwise be held as liquid collateral 

towards more productive uses, improving allocative efficiency.643   

Second, a shorter standard settlement cycle may increase price efficiency through its effect 

on credit risk exposures between financial intermediaries and their customers.  In particular, a prior 

study noted that certain intermediaries that transact on behalf of investors, such as broker-dealers, 

may be exposed to the risk that their customers default on payment obligations when the price of 

                                                 
641  Reduction of these risks should result in the reduction of margin requirements and other 

risk management activity that requires resources that could be put to another use. 

642  See supra Part VIII.B.2. 

643  See supra Part VIII.A. 



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purchased securities declines during the settlement cycle.644  As a result of the option to default on 

payment obligations, customers’ payoffs from securities purchases resemble European call options 

and, from a theoretical standpoint, can be valued as such.  Notably, the value of European call 

options increases in the time to expiration645 suggesting that the value of call options held by 

customers who purchase securities is increasing in the length of the settlement cycle.  In order to 

compensate itself for the call option that it writes, an intermediary may include the cost of these 

call options as part of its transaction fee and this cost may become a component of bid-ask spreads 

for securities transactions.  By reducing the value of customers’ option to default by reducing the 

option’s time to maturity, a shorter standard settlement cycle may reduce transaction costs in U.S. 

securities markets.  In addition, to the extent that any benefit buyers receive from deferring 

payment during the settlement cycle is incorporated in securities returns,646 the amendment to Rule 

15c6-1(a) may reduce the extent to which such returns deviate from returns consistent with 

changes in fundamentals. 

As discussed in more detail in Part VIII.C.2 above, the Commission believes that the 

amendment to Rule 15c6-1(a) will likely require market participants to incur costs related to 

infrastructure upgrades, and will likely yield benefits to market participants, largely in the form of 

reduced operational and financial risks related to settlement.  As a result, the Commission believes 

that the amendment to Rule 15c6-1(a) could affect competition in a number of different, and 

                                                 
644  See Madhavan et al., supra note 508. 

645  All other things equal, an option with a longer time to maturity is more likely to be in the 

money given that the variance of the underlying security’s price at the exercise date is higher. 

646  See supra Part VIII.B.2.Conformed to Federal Register version 

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potentially offsetting, ways. 

The prospective reduction in financial risks related to shortening the standard settlement 

cycle may represent a reduction in barriers to entry for certain market participants.647  Reductions 

in the financial resources required to cover an NSCC member’s clearing fund requirements that 

result from a shorter standard settlement cycle could encourage financial firms that currently clear 

transactions through NSCC clearing members to become clearing members themselves. 

Their entry into the market could promote competition among NSCC clearing members.  

Furthermore, if a reduction in settlement risks results in lower transaction costs for the reasons 

discussed above, market participants that were, on the margin, discouraged from supplying 

liquidity to securities markets due to these costs, could choose to enter the market for liquidity 

suppliers, increasing competition. 

At the same time, the Commission acknowledges that the process improvements required 

to enable a shorter standard settlement cycle could adversely affect competition.  Among clearing 

members, where such process improvements might be necessary to comply with the shorter 

standard settlement cycle required under the amendment to Rule 15c6-1(a), the cost associated 

with compliance might increase barriers to entry, because new firms will incur higher fixed costs 

associated with a shorter standard settlement cycle if they wish to enter the market.  Clearing 

members might choose to comply by upgrading their systems and processes or may choose instead 

to exit the market for clearing services.  The exit of clearing members could have negative 

consequences for competition among clearing members.  Clearing activity tends to be concentrated 

                                                 
647  See supra Part VIII.C.1. for a discussion of the reduction in credit, market, and liquidity 

risks to which NSCC would be subject as a result of a shortening of the settlement cycle and the 

subsequent reduction financial resources dedicated to mitigating those risks. 



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among larger broker-dealers.648  Clearing member exit could result in further concentration and 

additional market power for those clearing members that remain. 

Alternatively, some current clearing members may choose to comply in part by outsourcing 

their operational needs to third-party service providers.  Use of third-party service providers may 

represent a reasonable response to the operational costs associated with the amendment to Rule 

15c6-1(a).  To the extent that third-party service providers are able to spread the fixed costs of 

compliance across a larger volume of transactions than their clients, the Commission believes that 

the use of third-party service providers might impose a smaller compliance cost on clearing 

members than if these firms directly bore the costs of compliance.  The Commission believes that 

this impact may stretch beyond just clearing members.  The use of third-party service providers 

may mitigate the extent to which the amendment to Rule 15c6-1(a) raises barriers to entry for 

broker-dealers.  Because these barriers to entry may have adverse effects on competition between 

clearing members, the Commission believes that the use of third-party service providers may 

mitigate the adverse effects of the amendment to Rule 15c6-1(a) on competition between broker-

dealers. 

Existing market power may also affect the distribution of competitive impacts stemming 

from the amendment to Rule 15c6-1(a) across different types of market participants.  While, as 

noted above, reductions in the credit, market, and liquidity risks that broker-dealers, CCPs, and 

other market participants are subject to during the standard settlement cycle could promote 

competition among clearing members and liquidity suppliers, these groups may benefit to differing 

degrees, depending on the extent to which they are able to capture the benefits of a shortened 

standard settlement cycle. 

                                                 
648  See supra Part VIII.B.2. 



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Finally, a shorter standard settlement cycle might also improve the capital efficiency of the 

clearance and settlement process, which will promote capital formation in U.S. securities markets 

and in the financial system generally.649  A shorter standard settlement cycle will reduce the 

amount of time that collateral must be held for a given trade, thus freeing the collateral to be used 

elsewhere earlier.  For a given quantity of trading activity, collateral will also be committed to 

clearing fund deposits for a shorter period of time.  The greater collateral efficiency promoted by a 

shorter settlement cycle might also indirectly promote capital formation for market participants in 

the financial system in general.  Specifically, the improved capital efficiency that results from a 

shorter standard settlement cycle will enable a given amount of collateral to support a larger 

amount of financial activity. 

5. Quantification of Direct and Indirect Effects of a T+1 Settlement Cycle 

In previous years, several industry groups have released estimates for compliance costs 

associated with a shorter standard settlement cycle, including the SIA, the “Industry Steering 

Committee (“ISC”), and BCG.650  Although all of these studies examined prior shortenings of the 

settlement cycle including from T+5 to T+3 and from T+3 to T+2, in the absence of a current 

study examining shortening from the current T+2 to T+1, they serve as a useful rough initial 

estimate of the costs involved in a settlement cycle shortening.  The most recent of these, the BCG 

Study, performed a cost-benefit analysis of a T+2 standard settlement cycle.  Below is a summary 

                                                 
649  See supra Part VIII.A. for more discussion regarding capital formation and efficiency. 

650  See SIA Business Case Report, supra note 323; see also BCG Study, supra note 565; 

PRICEWATERHOUSECOOPERS LLP & ISG, SHORTENING THE SETTLEMENT CYCLE: THE MOVE TO 

T+2 (June 2015) (“ISG White Paper”), http://www.ust2.com/pdfs/ssc.pdf.  This release uses “ISG” 

rather than “ISC” (“Industry Steering Committee,” the term used in the ISG White Paper) when 

referring to the T+2 effort so that this release clearly distinguishes between the ISC’s current work 

on T+1.  The SIA has since merged with other groups to form SIFMA. 

http://www.ust2.com/pdfs/ssc.pdf


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of the cost estimates in the BCG Study, and in the following subsections, an evaluation of these 

estimates as part of the discussion of the potential direct and indirect compliance costs related to 

the amendment to Rule 15c6-1(a).  In addition, the Commission encouraged commenters to 

provide additional information to help quantify the economic effects that we are currently unable 

to quantify due to data limitations. 

a) Industry Estimates of Costs and Benefits 

The BCG Study concluded that the transition to a T+2 settlement cycle would cost 

approximately $550 million in incremental initial investments across industry constituent 

groups,651 which would result in annual operating savings of $170 million and $25 million in 

annual return on reinvested capital from clearing fund reductions.652   

The BCG Study also estimated that the average level of required investments per firm 

could range from $1 to 5 million, with large institutional broker-dealers incurring the largest 

amount of investments on a per-firm basis, and buy side firms at the lower end of the spectrum.653  

The investment costs for “other” entities, including DTCC, DTCC ITP Matching (US) LLC (f/k/a 

Omgeo Matching (US) LLC), service bureaus, registered investment companies (“RICs”), and 

non-self-clearing broker-dealers totaled $70 million for the entire group.  Within this $70 million, 

DTCC and Omgeo were estimated to have a compliance investment cost of $10 million each.  The 

                                                 
651  The BCG Study generally refers to “institutional broker-dealers,” “retail broker-dealers,” 

“buy side” firms, and “custodian banks,” without defining these particular groups.  The 

Commission uses these terms when referring to estimates provided by the BCG Study but notes 

that its own definitions of various affected parties may differ from those in the BCG Study. 

652  See BCG Study, supra note 565, at 9–10. 

653  Id. at 30–31. 



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study’s authors estimated that institutional broker-dealers would have operational cost savings of 

approximately 5%, retail broker-dealers of 2% to 4%, buy-side firms of 2%, and custodial banks of 

10% to 15% for an industry total operational cost savings of approximately $170MM per year.654   

The BCG Study also estimated the annual clearing fund reductions resulting from 

reductions in clearing firms’ clearing funds requirements to be $25 million per year.655  The study 

estimated this by multiplying the reduction in clearing fund requirements and the average Federal 

Funds target rate for the 10-year period up until 2008 (3.5%).  The BCG Study also estimated the 

value of the risk reduction in buy side exposure to the sell side.  The implied savings were 

estimated to be $200 million per year, but these values were not included in the overall cost-benefit 

calculations. 

Several factors limit the usefulness of the BCG Study’s estimates of potential costs and 

benefits of the amendment to Rule 15c6-1(a).  First, a further shortening of the settlement cycle to 

T+1 may require investments in new technology and processes that were not necessary under the 

previous shortening to T+2.  Second, technological improvements since 2012 when the report was 

first published, such as the increased use of computers and automation in post-trade processes, 

may have reduced the cost of the upgrades necessary to comply with a shorter settlement cycle.  

This may, in turn, reduce the costs associated with the amendment,656 as a larger portion of market 

participants may have already adopted many processes that would reduce the cost of a transition to 

                                                 
654  Id. at 41. 

655  See supra note 565 for a discussion of the impact on this estimate of increases in daily 

trading volume since the time of the BCG study. 

656  See supra Part VIII.A.  While market participants may have already made investments 

consistent with implementing a shorter settlement cycle, the fact that these investments have not 

resulted in a shorter settlement cycle is consistent with the existence of coordination problems 

among market participants. 



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a shorter settlement cycle.  In addition, the BCG Study considered as a part of its cost estimates 

operational cost savings as a result of improvements to operational efficiency.   

Lastly, the BCG Study was premised on survey responses by a subset of market 

participants that may be affected by the rule.  Surveys were sent to 270 market participants and 70 

responses were received, including 20 institutional broker-dealers, prime brokers, and 

correspondent clearers; 12 retail broker-dealers; 17 buy side firms; 14 registered investment 

advisers; and seven custodian banks.  Given the low response rate, as well as the uncertainty 

regarding the sample of market participants that was asked to complete the survey, the 

Commission cannot conclude that the cost estimates in the BCG Study are representative of the 

costs of all market participants.657   

b) Estimates of Costs  

The amendment to Rule 15c6-1(a) will generate direct and indirect costs for market 

participants, who may need to modify and/or replace multiple systems and processes to comply 

with a T+1 standard settlement cycle.  The T+1 Playbook included a timeline with milestones and 

dependencies necessary for a transition to a T+1 standard settlement cycle, as well as activities that 

market participants should consider in preparation for the transition, and the Commission believes 

that this provides an initial guide to the activities that will be necessary for a transition to a T+1 

standard settlement cycle.658  The Commission estimates that many of the activities for migration 

to a T+1 standard settlement cycle will stem from behavior modification of market participants and 

                                                 
657  See BCG Study, supra note 565, at 15. 

658  See T+1 Playbook, supra note 134. 



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systems testing.659  These modifications will include a compression of the settlement timeline, as 

well as an increase in the fees that brokers may impose on their customers for trade failures.  

Although the T+1 Playbook does not include any direct estimates of the compliance costs for a 

T+1 standard settlement cycle, the Commission utilizes the timeline in the T+1 Playbook for 

specific actions necessary to migrate to a T+1 settlement cycle to directly estimate the inputs 

needed for migration, and form preliminary compliance cost estimates for the shortening to T+1 

standard settlement cycle. 

In addition, the T+1 Playbook, the ISG White Paper, and the BCG Study identified several 

categories of actions that market participants might need to take to comply with a T+2 settlement 

cycle and likely also with a T+1 settlement cycle – processing, asset servicing, and 

documentation.660  While the following cost estimates for these remedial activities span industry-

wide requirements for a migration to a T+1 settlement cycle, the Commission does not anticipate 

each market participant directly undertaking all of these activities for several reasons.  First, some 

market participants work with third-party service providers to facilitate certain functions that may 

be impacted by a shorter standard settlement cycle, such as trade processing and asset servicing, 

and thus may only bear the costs of the requirements through updates to systems and processes that 

interface with and fees paid to those service providers.  Second, certain costs might only fall on 

specific categories of entities.  For example, the costs of updating the Continuous Net Settlement 

(“CNS”) and ID Net systems should only directly fall on NSCC, DTC, and members/participants 

of those clearing agencies.  Finally, some market participants may already have the processes and 

                                                 
659  See id. at 67–68 (discussing customer and staff education); see also id. at 103–107 

(discussing testing and migration).  

660  See id. at 14.  



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systems in place to accommodate a T+1 standard settlement cycle or will be able to adjust to a T+1 

settlement cycle without incurring significant costs.  For example, some market participants may 

already have the systems and processes in place to meet the requirements for same-day trade 

affirmation and matching consistent with the requirements in new Rule 15c6-2.661  These market 

participants may thus bear a significantly lower cost to update their trade affirmation 

systems/processes to settle on a T+1 standard settlement cycle.662   

The following section examines several categories of market participants and includes 

estimates the compliance costs for each category.  The Commission’s estimate of the number and 

type of personnel that may be required is based on the scope of activities for a given category of 

market participant necessary for the market participant to migrate to a T+1 settlement cycle, the 

market participant’s role within the clearance and settlement process, and the amount of testing 

required to minimize undue disruptions.663  Hourly salaries for personnel are from SIFMA’s 

Management and Professional Earnings in the Securities Industry 2013.664  These estimates use the 

timeline from the T+1 Playbook to determine the length of time personnel will work on the 

                                                 
661  See BCG Study, supra note 565, at 23. 

662  The BCG Study, as it is based on survey responses from market participants, does reflect 

the heterogeneity of compliance costs for market participants.  

663  For example, FMUs that play a critical role in the clearance and settlement infrastructure 

would require more testing associated with a T+1 standard settlement cycle than institutional 

investors. 

664  To monetize the internal costs, the Commission staff used data from SIFMA publications, 

modified by Commission staff to account for an 1800 hour work-year, and multiplied by 5.35 

(professionals) or 2.93 (office) to account for bonuses, firm size, employee benefits and overhead.  

See SIFMA, Management and Professional Earnings in the Security Industry – 2013 (Oct. 7, 

2013); SIFMA, Office Salaries in the Securities Industry – 2013 (Oct. 7, 2013).  These figures 

have been adjusted for inflation using the Bureau of Labor Statistics’ Consumer Price Index 

inflation calculator, https://www.bls.gov/data/inflation_calculator.htm. 

https://www.bls.gov/data/inflation_calculator.htm


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activities necessary to support a T+1 settlement cycle.  The timeline provides an indirect method to 

estimate the inputs necessary to migrate to a T+1 settlement cycle, rather than relying directly on 

survey response estimates.  The Commission acknowledges many entities are already undertaking 

activities to support a migration to a T+1 settlement cycle in anticipation of the amendment.  

However, to the extent that the costs of these activities have already been incurred, the 

Commission considers these costs sunk, and they are not included in the analysis below. 

(1) FMUs – CCPs and CSDs 

CNS, NSCC/DTC’s ID Net service, and other systems will require adjustment to support a 

T+1 standard settlement cycle.  The T+1 Playbook includes an estimate that regulation-dependent 

planning, implementation, testing, and migration activities associated with the transition to a T+1 

settlement cycle could last up to six quarters.665  The Commission estimates that these activities 

will impose a one-time compliance cost of $16.1 million666 for DTC and NSCC each.  After this 

initial compliance cost, the Commission expects that both DTC and NSCC will incur minimal 

ongoing costs from the transition to a T+1 standard settlement cycle, because the Commission 

estimates that the majority of costs will stem from pre-migration activities, such as 

implementation, updates to systems and processes, and testing. 

                                                 
665  See T+1 Playbook, supra note 134, at 14.  The T+1 Playbook assumes an implementation 

date during the third quarter of 2024.  We assume that the necessary tasks and the total time 

required to complete them would be similar for an earlier implementation date.  

666  The estimate is based on the T+1 Playbook timeline, which estimates regulation- dependent 

implementation activity, industry testing, and migration lasting six quarters.  The Commission 

assumes 10 operations specialists (at $159 per hour), 10 programmers (at $316 per hour), and 1 

senior operations manager (at $426/hour), working 40 hours per week.  (10 × $159 + 10 × $316 + 1 

× $426) × 6 × 13 × 40 = $16,149,120. 



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(2) Matching/ETC Providers – Exempt Clearing Agencies 

Matching/ETC Providers may need to adapt their trade processing systems to comply with 

a T+1 standard settlement cycle.  This may include actions such as updating reference data, 

configuring trade match systems, and configuring trade affirmation systems to affirm trades on 

T+0.  Matching/ETC Providers will also need to conduct testing and assess post-migration 

activities.  The Commission estimates that these activities will impose a one-time compliance cost 

of up to $16.1 million667 for each Matching/ ETC Provider.  However, the Commission 

acknowledges that some ETC providers may have a higher cost burden than others based on the 

volume of transactions that they process.  The Commission expects that ETC providers will incur 

minimal ongoing costs after the initial transition to a T+1 standard settlement cycle because the 

Commission estimates that the majority of the costs of migration to a T+1 settlement cycle entail 

behavioral changes of market participants and pre-migration testing. 

New Rule 17Ad-27 requires a CMSP to establish, implement, maintain, and enforce 

reasonably designed, written policies and procedures.  Based on the similar policies and 

procedures requirements, and the corresponding burden estimates previously made by the 

                                                 
667  The estimate is based on the T+1 Playbook timeline, which estimates regulation- dependent 

implementation activity for trade systems, matching, affirmation, testing, and post- migration 

testing lasting six quarters.  The Commission assumes 10 operations specialists (at $159 per hour), 

10 programmers (at $316 per hour), and 1 senior operations manager (at $426/hour), working 40      

hours per week.  (10 × $159 + 10 × $316 + 1 × $426) × 6 × 13 × 40 = $16,149,120. 



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Commission for Rule 17Ad-22(d)(8) and (e)(2),668 the Commission estimates that respondent 

CMSPs will incur an aggregate one-time cost of approximately $27,600.669 

The rule also imposes ongoing burdens on a respondent CMSP as follows: (i) ongoing 

monitoring and compliance activities with respect to the written policies and procedures required 

by the proposed rule; and (ii) ongoing documentation activities with respect to the required annual 

report.  As discussed in Part V.C.2, the Commission has modified the final rule to identify specific 

data elements to be included in the annual report.  Based on the similar reporting requirements, and 

the corresponding burden estimates previously made by the Commission for Rule 17Ad-

22(e)(23),670 the Commission estimates that the ongoing activities required by new Rule 17Ad-27 

will impose an aggregate annual cost of this ongoing burden of approximately $71,400.671 

                                                 
668  See Clearing Agency Standards, Exchange Act Release No. 68080 (Oct. 22, 2012), 77 FR 

66219, 66260 (Nov. 2, 2012) (“Clearing Agency Standards Adopting Release”); Standards for 

Covered Clearing Agencies, Exchange Act Release No. 78961 (Sept. 28, 2016), 81 FR 70786, 

70891–92 (Oct. 13, 2016) (“CCA Standards Adopting Release”). 

669  There are currently three CMSPs and the Commission anticipates that one additional entity 

may seek to become a CMSP in the next three years.  The aggregate cost was estimated as follows: 

(Assistant General Counsel at $543/hour x 8 hours = $4,344) + (Compliance Attorney at 

$426/hour x 6 hours = $2,556) = $6,900 x 4 CMSPs equals $27,600.   

670  See CCA Standards Adopting Release, supra note 668, at 70899. 

671  This figure was calculated as follows: [(Compliance Attorney at $426/hour x 24 hours = 

$10,224) + (Computer Operations Manager at $514/hour x 10 hours = $5,140) = $15,364 x 4 

CMSPs = $61,456].  In addition, we estimate that the Inline XBRL requirement would require 

respondent CMSPs to spend $1,200 each year to license and renew Inline XBRL compliance 

software and/or services, and incur 3 internal burden hours to apply and review Inline XBRL tags 

for the disclosure requirements on the report, resulting in a total annual aggregate cost of $9,912 

[(Compliance Attorney at $426/hour x 3 hours = $1,278) + $1,200 in external costs = $2,478 x 4 

CMSPs = $9,912].  The total costs are the non-XBRL related costs ($61,546) + XBRL related 

costs ($9,912) = $71,368.  We have increased these estimates because, compared to the proposal, 

the reports required by Rule 17Ad-27 will contain significantly more disclosures, and each of those 

additional disclosures will need to be tagged.  In addition, respondent CMSPs that do not already 

have access to EDGAR would be required to file a Form ID so as to obtain the access codes that 



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(3) Market Participants – Investors, Broker-Dealers, 

Investment Advisers, and Bank Custodians 

The overall compliance costs that a market participant incurs will depend on the extent to 

which it is directly involved in functions related to clearance and settlement including trade 

confirmation/affirmation, asset servicing, and other activities.  For example, retail investors may 

bear few (if any) direct costs in a transition to a T+1 standard settlement cycle, because their 

respective broker-dealer handles the back-office functions of each transaction.  However, as is 

discussed below, this does not imply that retail investors will not face indirect costs from the 

transition, such as those passed through from broker-dealers or banks. 

Institutional investors may need to configure systems and update reference data, which may 

also include updates to trade funding and processing mechanisms, to operate in a T+1 

environment.  The Commission estimates that this will require an initial expenditure of $4.29 

million per entity.672  However, these costs may vary depending on the extent to which a particular 

institutional investor has already automated its processes.  The Commission expects institutional 

investors will incur minimal ongoing direct compliance costs after the initial transition to a T+1 

                                                 

are required to file or submit a document on EDGAR.  We anticipate that each respondent would 

require 0.30 hours to complete the Form ID, and for purposes of the PRA, that 100% of the burden 

of preparation for Form ID will be carried by each respondent internally.  Because two respondent 

CMSPs already have access to EDGAR, we anticipate that proposed amendments would result in a 

one-time nominal increase of 0.60 burden hours for Form ID, which would not meaningfully add 

to, and would effectively be encompassed by, the existing burden estimates associated with these 

reports.  

672  The estimate is based on the T+1 Playbook timeline, which estimates regulation- dependent 

implementation activity for trade systems, reference data, and testing activity to last six quarters.  

We assume 2 operations specialists (at $159 per hour), 2 programmers (at $316 per hour), and 1 

senior operations manager (at $426 per hour), working 40 hours per week.  (2 × $159+ 2 × $316 + 

1 × $426) × 6 × 13 × 40 = $4,293,120. 



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standard settlement cycle. 

Broker-dealers that serve institutional investors will not only need to configure their trading 

systems and update reference data, but may also need to update trade confirmation/affirmation 

systems, documentation, cashiering and asset servicing functions, depending on the roles they 

assume with respect to their clients.  The Commission estimates that, on average, each of these 

broker-dealers will incur an initial compliance cost of $8.74 million.673  The Commission expects 

that these broker-dealers will incur minimal ongoing direct compliance costs after the initial 

transition to a T+1 standard settlement cycle. 

Broker-dealers that also serve retail customers may need to spend significant resources 

during the implementation period to educate their clients about the shorter settlement cycle.  The 

Commission estimates that these broker-dealers will incur an initial compliance cost of $12.73 

million each.674  However, unlike previously mentioned market participants, the Commission 

expects that broker-dealers that serve retail investors may face significant one-time compliance 

costs after the initial transition to T+1.  Retail investors may require additional education and 

customer service, which may impose costs on their broker-dealers.  The Commission estimates that 

                                                 
673  The estimate is based on the T+1 Playbook timeline, which estimates regulation- dependent 

implementation activity for trade systems, reference data, documentation, asset servicing, and 

testing to last six quarters.  We assume 5 operations specialists (at $159 per hour), 5 programmers 

(at $316 per hour), and 1 senior operations manager (at $426 per hour), working 40 hours per week.  

(5 × $159 + 5 × $256 + 1 × $345) × 6 × 13 × 40 = $8,739,120. 

674  The estimate is based on the T+1 Playbook timeline, which estimates regulation- dependent 

implementation activity for trade systems, reference data, documentation, asset servicing, customer 

education and testing to last five quarters.  We assume 5 operations specialists (at $159 per hour), 

5 programmers (at $316 per hour), 5 trainers (at $256 per hour) and 1 senior operations manager 

(at $426 per hour), working 40 hours per week.  (5 × $159 + 5 × $316 + 5 × $256 + 1 × $426) × 6 

× 13 × 40 = $12,732,720. 



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a reasonable upper bound for the costs associated with this requirement is $30,000 per broker-

dealer.675  Assuming all clearing and introducing broker-dealers must educate retail customers, the 

upper bound for the aggregate costs of post implementation retail investor education will be 

approximately $38.2 million.676   

As discussed above in Part III.C, the Commission is modifying proposed Rule 15c6-2 to 

provide two options by which broker-dealers may comply with the rule, as adopted.  The two 

options are set forth in new paragraphs (a)(1) and (2).  The first option, reflected in paragraph 

(a)(1), is the proposed requirement for written agreements, modified in the ways discussed above.  

The second option, reflected in paragraph (a)(2), is an alternative to the written agreements 

requirement, in lieu of which a broker-dealer may choose to establish, maintain, and enforce 

written policies and procedures reasonably designed to ensure the completion of the allocation, 

confirmation, affirmation, or any combination thereof, for the transaction as soon as 

technologically practicable and no later than the end of the day on trade date in such form as 

necessary to achieve settlement of the transaction.  

The first option, reflected in paragraph (a)(1), will require broker-dealers to either enter 

into or modify existing written agreements with the relevant parties that ensure the completion of 

the allocation, confirmation, and affirmation process.  Such parties may be the customer, the 

customer’s investment adviser, the customer’s custodian, or another agent acting directly or 

indirectly on behalf of the customer.  The number of such agreements will vary depending on the 

                                                 
675  This estimate is based on the assumption that a broker-dealer chooses to educate customers 

using a 10-minute video that takes at most $3,000 per minute to produce.  See Exchange Act 

Release No. 76324 (Oct. 30, 2015), 80 FR 71388, 71529 n.1683 (Nov. 16, 2015).  

676  Calculated as $30,000 per broker-dealer × (92 broker-dealers reporting as self-clearing but 

not introducing + 1,114 broker-dealers reporting as introducing but not self-clearing + 68 broker-

dealers reporting as introducing and self-clearing) = $38,220,000. 



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number of relevant parties which will vary by the size of the broker-dealer, the number of 

customers, and the particular business relationship that the broker-dealer has with each of them.  

As discussed in Part III.B.5 above, several commenters expressed a number of concerns with the 

written agreement requirement as proposed.  First, commenters stated that in many scenarios 

written agreements do not currently exist between the parties to an institutional transaction and 

would be highly burdensome to establish specifically for the purpose of facilitating same day 

affirmation.  In addition, commenters expressed the view that the proposed written agreement 

requirement would create unnecessary practical burdens and costs.677   

The Commission acknowledges that in cases such as the ones described by commenters 

above—where these written agreements do not already exist, a client may not authorize its 

investment adviser to enter into this type of written agreement, or various third parties are relied 

upon to complete certain elements of the allocation, confirmation, and affirmation process—a 

requirement to enter into written agreements specifically to address the same-day affirmation 

objective may create substantial burdens and challenges for the parties to an institutional 

transaction.  Accordingly, as discussed in Part III.C above, the Commission is including in the 

final rule a second option, reflected in paragraph (a)(2), that specifies as an alternative to the 

written agreement requirement a policies and procedures requirement.   

The Commission believes that establishing policies and procedures as an alternative 

approach to compliance aside from entering into written agreements enables broker-dealers to 

avoid the substantial burdens and challenges that may be associated with negotiating written 

agreements in some cases.  However, the Commission also believes that it may be less costly for 

broker-dealers that already use written agreements to manage their commercial relationships with 

                                                 
677  See supra note 222. 



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their customers’ advisers, custodians or other agents using such agreements and that broker-dealers 

will generally chose to comply with the rule using the option that is less costly for that broker-

dealer’s particular circumstances. 

The second option, reflected in paragraph (a)(2) of new Rule 15c6-2, requires a broker-

dealer to establish, maintain, and enforce policies and procedures to ensure completion of the 

allocation, confirmation, affirmation, or any combination thereof, for a transaction as soon as 

technologically practicable and no later than the end of the day on trade date, in such form as 

necessary to achieve settlement.  As a general matter, most broker-dealers maintain policies and 

procedures to ensure the timely settlement of their transactions,678 and the securities industry 

considers achieving “same-day affirmation” an industry best practice.679  Nonetheless, the 

Commission believes that respondent broker-dealers will need to evaluate existing policies and 

procedures, identify any gaps, and then develop modifications to address those gaps.680  

Accordingly, the Commission estimates that respondent broker-dealers would incur an aggregate 

                                                 
678  See, e.g., SIFMA August 26th Letter, supra note 207, at 2. 

679  See supra note 515. 

680  Rule 15c6-2(b)(1) requires that the written policies and procedures that any broker or 

dealer may establish, maintain, and enforce as required by Rule 15c6-2 should, among other 

requirements: (1) Identify and describe any technology systems, operations, and processes that the 

broker or dealer uses to coordinate with other relevant parties, including investment advisers and 

custodians, to ensure completion of the allocation, confirmation, or affirmation process for the 

transaction, and (2) Describe how the broker or dealer plans to identify and address delays if 

another party, including an investment adviser or a custodian, is not promptly completing the 

allocation or affirmation for the transaction, or if the broker or dealer experiences delays in 

promptly completing the confirmation.  In cooperation with the broker or dealer, the relevant 

parties (including investment advisers and custodians) may incur some costs; however, those costs 

will vary depending on current systems at the relevant party and broker or dealer, the nature of the 

business relationship between the relevant party and the broker or dealer, and how the business of 

the relevant party is organized. 



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one-time burden of approximately 240 hours to create policies and procedures required under the 

rule,681  and that the cost of this one time burden per broker-dealer would be $88,880.682  The 

Commission estimates that approximately 411 broker-dealers would be subject to the requirements 

of Rule 15c6-2.683  The total industry cost is estimated to be approximately $36.5M.684 

Rule 15c6-2 also imposes ongoing burdens on a respondent broker-dealer as follows: (i) 

ongoing monitoring and compliance activities with respect to the written policies and procedures 

required by the rule; and (ii) ongoing documentation activities with respect to its obligations to 

measure, monitor, and document the rates of allocations, confirmations, and affirmations 

completed as soon as technologically practicable and no later than the end of the day on trade date.  

The Commission estimates that the ongoing activities required by Rule 15c6-2 would impose an 

aggregate annual burden on respondent broker-dealers of 480 hours,685 and a cost per broker-dealer 

                                                 
681  This figure was calculated as follows: (Assistant General Counsel for 20 hours + 

Compliance Attorney for 120 hours + Senior Risk Management Specialist for 20 hours + Risk 

Management Specialist for 80 hours) = 240 hours x 411 respondents = 98,640 hours.  

682  This figure was calculated as follows: (Assistant General Counsel at $543/hour x 20 hours 

= $10,860) + (Compliance Attorney at $426/hour x 120 hours = $51,120) + (Senior Risk 

Management Specialist at $417/hour x 20 hours = $8,340) + (Risk Management Specialist at 

$232/hour x 80 hours = $18,560) = $88,880 x 411 respondents = $36,529,680.   

683  See infra Part IX.C.2. 

684  See supra note 682. 

685  This figure was calculated as follows: (Assistant General Counsel for 48 hours + 

Compliance Attorney for 192 hours + Senior Risk Management Specialist for 48 hours + Risk 

Management Specialist for 192 hours) = 480 hours x 411 respondents = 197,280 hours. 



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of $172,416.686  The total industry cost is estimated to be approximately $107M.687 

The Commission believes this estimate is an upper bound on the compliance costs 

associated with the second option, reflected in paragraph (a)(2) of new Rule 15c6-2 for at least two 

reasons.  First, broker-dealers may choose the first option, reflected in paragraph (a)(1), if it is less 

burdensome for them to do so.  Second, if a large number of broker-dealers chose the second 

option it may be more efficient for a third party to develop a set of best practices that could form 

the basis of the policies and procedures required for each broker-dealer that choses the second 

option.   

Custodian banks will need to update their asset servicing functions to comply with a shorter 

settlement cycle.  The Commission estimates that custodian banks will incur an initial compliance 

cost of $4.29 million,688 and expects custodian banks to incur minimal ongoing compliance costs 

after the initial transition because the Commission believes that most of the costs will stem from 

pre-migration updates and testing. 

The amendment to Rule 204-2 will require registered investment advisers to make and keep 

records of confirmations they receive and of allocations and affirmations they send or receive for 

                                                 
686  This figure was calculated as follows: (Assistant General Counsel at $543/hour x 48 hours 

= $26,064) + (Compliance Attorney at $426/hour x 192 hours = $81,792) + (Senior Risk 

Management Specialist at $417/hour x 48 hours = $20,016) + (Risk Management Specialist at 

$232/hour x 192 hours = $44,544) = $172,416 x 411 respondents = $70,862,976.   

687  This figure was calculated as follows: $36,529,680 (industry one-time burden) + 

$70,862,976 (industry ongoing burden) = $107,392,656.   

688  The estimate is based on the T+1 Playbook timeline, which estimates regulation-dependent 

implementation activity for asset servicing and testing to last six quarters.  We assume 2 operations 

specialists (at $159 per hour), 2 programmers (at $316 per hour), and 1 senior operations manager 

(at $426 per hour), working 40 hours per week.  (2 × $159 + 2 × $316 + 1 × $426) × 6 × 13 × 40 = 

$4,293,120. 



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securities transactions that are subject to the requirements of Rule 15c6-2(a).  Based on Form ADV 

filings, approximately 15,160 advisers registered with the Commission are required to make and 

keep copies of certain books and records relating to their advisory business.689  The Commission 

further estimates that of these advisers, 2,169 registered advisers will not retain the required 

records under the final rule because they do not have any institutional advisory clients.  Therefore, 

the Commission estimates that 12,991 advisers will be subject to the final amendment to Rule 204-

2 under the Advisers Act because they will facilitate transactions with a broker or dealer that is 

subject to the requirements of Rule 15c6-2(a) and therefore will be subject to the related 

recordkeeping requirement.690  As discussed above, based on staff experience, the Commission 

believes that many advisers already have recordkeeping processes in place to make and keep 

records of confirmations received, and allocations and affirmations sent or received.  The 

Commission believes these are customary and usual business practices for many advisers, but that 

some small and mid-size advisers may not currently retain these records.  Further, the Commission 

believes that the vast majority of these books and records are kept in electronic fashion with an 

ability to capture a date and time stamp, such as in a trade order management or other 

recordkeeping system, through system logs of file transfers, email archiving, or as part of DTC’s 

Institutional Trade Processing services, but that some advisers maintain paper records (e.g., 

confirmations) and/or communicate allocations by telephone.  In addition, as noted in Part III.C 

above, we believe that up to 70% of institutional trades are affirmed by custodians, and therefore 

                                                 
689  See infra note 4 to Table 2. 

690  See id. 



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advisers may not retain or have access to the affirmations these custodians sent to brokers or 

dealers.691 

In a change from the proposal, we estimate three-hour information collection burden 

annually per impacted adviser associated with the new recordkeeping requirements.692  We 

estimate that the amendments to Rule 204-2 will result in an additional internal cost of 

approximately $3.02 million per year.693  This estimate takes into account potential additional 

burdens associated with the new recordkeeping requirement for advisers that do not currently 

retain these records, but will be required to do so under the final rule.  These estimates are also 

designed to address any burdens for advisers that may retain such documents, but do not do so 

electronically and/or do not time and date stamp such documents or otherwise retain the 

documents in a way that complies with the final rule.694  In addition, the revised estimates factor in 

any costs associated with receiving copies of, or having access to, required records that are 

                                                 
691  See DTCC ITP Forum Remarks, supra note 264.  

692  The Commission believes that most of the necessary records are already being retained as 

advisers generally retain their communications and trade instructions to comply with other 

recordkeeping obligations.  If these records are not being kept, the Commission believes the 

burden will be small to start retaining them because the requirement pertains to records that are 

sent or received and does not require new records to be created.   

693  The estimate assumes that the amendments to Rule 204-2 will result in an incremental 

increase in the collection of information burden estimate by 3 hours for 12,991 investment 

advisers.  For each such adviser, we assume 1.5 hour for a compliance clerk (at $82 per hour) and 

1.5 hour for a general clerk (at $73 per hour) = $233 per investment adviser * 12,991 investment 

advisers = an incremental increase of $3,020,408 in internal costs. 

694  For more discussion, see infra Part IX.A.Conformed to Federal Register version 

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retained by a custodian or other third-party, including cost-savings associated with the adviser’s 

ability to rely on third parties to meet its recordkeeping obligations under the rule.695    

(4) Indirect Costs 

In estimating these implementation costs, the Commission notes that market participants 

who bear the direct costs of the actions they undertake to comply with the amendment to Rule 

15c6-1 may pass these costs on to their customers.  For example, retail and institutional investors 

might not directly bear the cost of all of the necessary upgrades for a T+1 standard settlement 

cycle, but might indirectly bear these costs as their broker-dealers might increase their fees to 

amortize the costs of updates among their customers.  The Commission is unable to quantify the 

overall magnitude of the indirect costs that retail and institutional investors may bear, because such 

costs will depend on the market power of each broker-dealer, and each broker-dealer’s willingness 

to pass on the costs of migration to a T+1 standard settlement cycle to its customers.  However, the 

Commission believes that in situations where broker-dealers have little or no competition, broker-

dealers will have an incentive to absorb part of the cost increase.  As discussed in Part 

VIII.C.5.b)(3) above, this could be as high as the full amount of the estimated $8.74 million for 

each broker-dealer that serves institutional investors, and $12.73 million for each broker-dealer 

that serves institutional and retail investors.  However, in situations where broker-dealers face 

heavy competition for customers, there may be little or no economic profits and price may equal 

marginal cost so an increase in costs could be fully passed through to the customer.696   

As noted in Part VIII.B.4, the ability of market participants to pass implementation costs on 

                                                 
695  One commenter recommended that the Commission update these estimates.  See infra Part 

IX.A for a discussion of the commenter’s recommendation and the Commission’s justification for 

the burden estimates. 

696  See supra note 621. 



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to customers likely depends on their relative bargaining power.  For example, CCPs, like many 

other utilities, exhibit many of the characteristics of natural monopolies and, as a result, may have 

market power, particularly relative to broker-dealers who submit trades for clearing.  This means 

that CCPs may be able to share implementation costs they directly face related to shortening the 

settlement cycle with broker-dealers through higher clearing fees.  Conversely, to the extent that 

institutional investors have market power relative to broker-dealers, broker-dealers may not be in a 

position to impose indirect costs on them. 

(5) Industry-Wide Costs 

To estimate the aggregate, industry-wide cost of a transition to a T+1 standard settlement 

cycle, the Commission takes its own per-entity estimates and multiplies them by our estimate of 

the respective number of entities.  The Commission estimates that there are 1,229 buy-side firms, 

160 self-clearing broker-dealers, and 48 custodian banks.697  Additionally, while there are three 

Matching/ETC Providers, the Commission believes that only one of these is currently providing 

services in the U.S.  We estimate there are 1,274 broker-dealers that will incur investor education 

costs.  One way to establish a total industry initial compliance cost estimate is to multiply each 

estimated per-entity cost by the respective number of entities and sum these values, which results 

in an estimate of $7.76 billion.698  The Commission, however, believes that this estimate is likely 

                                                 
697  The estimate for the number of buy-side firms is based on the Commission’s 13(f) holdings 

information filers with over $1 billion in assets under management, as of December 31, 2020.  The 

estimate for the number of broker-dealers is based on FINRA FOCUS Reports of firms reporting 

as self-clearing.  See supra note 525 and accompanying text.  The estimate for the number of 

custodian banks is based on the number of “settling banks” listed in DTC’s Member Directories, 

http://www.dtcc.com/client-center/dtc-directories.   

698  Calculated from estimates derived above in this section (Part VIII.C.5) as 160 broker-

dealers (self-clearing) × $12,733,000 + + 48 custodian banks × $4,293,000 + 1,229 buy-side firms 

× $4,293,000 + 4 Matching/ETC Providers × ($16,149,000 + $6,900) + 2 FMUs × $16,149,000 + 

12,991 IAs x $233 + 411 broker-dealers with institutional customers x $88,880$ 7,763M. 

http://www.dtcc.com/client-center/dtc-directories


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to overstate the true initial cost of transition to a T+1 standard settlement cycle for a number of 

reasons.  First, our per-entity estimates do not account for the heterogeneity in market participant 

size, which may have a significant impact on the costs that market participants face.  While the 

BCG Study included both estimates of the number of entities in different size categories as well as 

estimates of costs that an entity in each size category is likely to incur, it did not provide sufficient 

underlying information to allow the Commission to estimate the relationship between participant 

size and compliance cost and, thus, we cannot produce comparable estimates.  The Commission 

solicited comment on the extent to which market participants believe that the compliance costs for 

Rule 15c6-1(a) would scale with market participant size and did not receive data that could be used 

to improve these estimates. 

Second, investments by third-party service providers may mean that many of the estimated 

compliance costs for market participants are duplicated.  The BCG Study suggests that “leverage” 

from service providers may yield a savings of $194 million, reducing aggregate costs by 

approximately 29%.699  In the T+1 Proposing Release, the Commission sought further comment on 

the extent to which the efficiencies generated by the investments of service providers might reduce 

the compliance costs of market participants.  Taking into account potential cost reductions due to 

repurposing existing systems and using service providers as described above, the Commission 

believes that $5.51 billion represents a reasonable range for the total industry initial compliance 

costs.700   

In addition to these initial costs, a transition to a shorter settlement cycle may also result in 

certain ongoing industry-wide costs.  Though the Commission believes that a move to a shorter 

                                                 
699  See BCG Study, supra note 565, at 79. 

700  The lower bound of this range is calculated as ($7.76 billion x (1 – 0.29)) = $5.51 billion. 



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settlement cycle will generally bring with it a reduced reliance on manual processing, a shorter 

settlement cycle may also exacerbate remaining operational risk.  This is because a shorter 

settlement cycle will provide market participants with less time to resolve errors.  For example, if 

there is an entry error in the trade match details sent by either counterparty for a trade, both 

counterparties will have one extra day to resolve the error under the baseline than in a T+1 

environment.  For these errors, a shorter settlement cycle may increase the probability that the 

error ultimately results in a settlement fail.  However, the Commission believes that a large variety 

of operational errors are possible in the clearance and settlement process, and some of these errors 

are likely to be infrequent, the Commission is unable to quantify the impact that a shorter 

settlement cycle may have on the ongoing industry-wide costs stemming from a potential increase 

in operational risk. 

D. Consideration of Reasonable Alternatives 

1. Delete 15c6-1(c) to T+2 

In the T+1 Proposing Release the Commission proposed to delete paragraph (c) of the 

rule,701  which would, in conjunction with the proposed amendment to paragraph (a), establish a 

T+1 standard settlement cycle for firm commitment offerings priced after 4:30 p.m. ET.  The 

Commission requested comment on whether, as an alternative to deleting paragraph (c), it be 

amended in order to shorten the settlement cycle for firm commitment offerings to T+2.  In 

response to comments received and as discussed in Part II.B.3 and Part II.C.4 above, the 

Commission is adopting this alternative.   

                                                 
701  See T+1 Proposing Release, supra note 2, at 10448–49. 



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2. Adopt 17Ad-27 to Require Certain Outcomes 

The Commission proposed Rule 17Ad-27 to require a CMSP establish, implement, 

maintain, and enforce policies and procedures to facilitate straight-through processing for 

transactions involving broker-dealers and their customers.702  As proposed, Rule 17Ad-27 would 

require a CMSP to submit every twelve months to the Commission a report that describes the 

following: (i) the CMSP’s current policies and procedures for facilitating straight-through 

processing; (ii) its progress in facilitating straight-through processing during the twelve month 

period covered by the report; and (iii) the steps the CMSP intends to take to facilitate and promote 

straight-through processing during the twelve month period that follows the period covered by the 

report.703    

The Commission proposed a “policies and procedures” approach in developing the rule 

because it believes such an approach will remain effective over time as CMSPs consider and offer 

new technologies and operations to improve the settlement of institutional trades.  The 

Commission also believes that improving the CMSPs’ systems to facilitate straight-through 

processing can help market participants consider additional ways to make their own systems more 

efficient.  In addition, a “policies and procedures” approach can help ensure that a CMSP 

considers, in a holistic fashion, how the obligations it applies to its users will advance the 

implementation of methodologies, operational capabilities, systems, or services that support 

straight-through processing. 

The Commission has considered as an alternative to the policies and procedures approach 

in proposed Rule 17Ad-27, proposing a rule to require CMSPs to achieve certain outcomes that 

                                                 
702  See id. at 10457–61. 

703  As adopted, the Rule 17Ad-27 reporting requirement has been revised.  See supra Part V.C. 



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would facilitate straight-through processing.  For example, the Commission considered a 

requirement that a CMSP do the following: (i) enable the users of its service to complete the 

matching, confirmation, or affirmation of the securities transaction as soon as technologically and 

operationally practicable and no later than the end of the day on which the transaction was effected 

by the parties to the transaction; or (ii) forward or otherwise submit the transaction for settlement 

as soon as technologically and operationally practicable, as if using fully automated systems. 

However, as discussed in Part V.C.1. above, the Commission believes that a policies and 

procedures approach will better meet the objectives of promoting STP by requiring policies and 

procedures that include a holistic review and framework for considering how systems and 

processes facilitate straight-through processing, and that can adapt over time to changes in 

technology and operations, both among and beyond the CMSP’s systems.  Therefore the 

Commission is adopting new Rule 17Ad-27 as proposed but with the two modifications discussed 

above. 

3. Adopt Rule Changes to Rule 15c6-2 as recommended by SIFMA’s August 

Comment Letter 

As previously mentioned in Part III.B.7., the Commission received an additional comment 

letter from SIFMA addressing alternatives to proposed Rule 15c6-2.704  SIFMA recommended that 

the Commission revise proposed Rule 15c6-2 to replace the written agreement requirement with a 

requirement for policies and procedures that can support faster processing, which would allow 

individual firms to advance the Commission’s interest in same-day affirmation while ensuring that 

                                                 
704  See SIFMA August 26th Letter, supra note 194, at 2–3.  



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broker-dealers can design policies and procedures tailored to their business models, products, and 

unique customer bases.705   

SIFMA’s recommendation included a number of elements.  First, SIFMA requested that 

Rule 15c6-2 be revised to require policies and procedures reasonably designed to maintain timely 

settlement rates.706  Second, SIFMA recommended that such policies and procedures: (i) address 

the timing of allocations, confirmations, and affirmations to ensure timely settlement; (ii) include a 

communication plan with market participants; (iii) provide a description of a broker-dealers’ 

ability to monitor compliance; (iv) include the development of controls and supervisory 

procedures; and (v) include the development of metrics to measure compliance.707   

The Commission agrees that the policies and procedures approach is beneficial, and thus is 

revising final Rule 15c6-2 to allow broker-dealers to achieve compliance with the rule either by 

entering into written agreements or by establishing, implementing, and maintaining policies and 

procedures. Economically, options always have a positive value when they allow the holder to 

choose amongst a menu of choices; in this case, the ability to choose amongst approaches should 

present a benefit to broker-dealers, who can better assess which one of these two alternatives 

provides the most efficient path to compliance with the rule. Discussion of the costs for each of 

these alternatives can be found in section C.5.b)(3). 

In terms of what the policies and procedures dictate, the Commission believes, as 

mentioned in Part III.B.7, that timely settlement is a separate, if related, objective from same-day 

                                                 
705  See id. at 2.  In Part III.B.5., above, the Commission has previously discussed why it 

believes it appropriate to retain the written agreement requirement in the rule, while also adding an 

option to establish, maintain, and enforce written policies and procedures.  

706  See id. 

707  See id. at 2–3.  



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affirmation. As discussed in Part III.B.1 above, the Commission continues to believe that 

improving affirmation rates on trade date is an objective separate and apart from, though related to, 

shortening the settlement cycle, because it promotes an orderly settlement process regardless of the 

length of the settlement cycle.   

Other than the different specifications of the policies and procedures just mentioned, the 

Commission believes that it is generally adopting SIFMA’s recommendations with respect to: 

addressing the timing of allocations, confirmations, and affirmations to ensure timely settlement; 

including a communication plan with market participants; providing a description of a broker-

dealers’ ability to monitor compliance; including the development of controls and supervisory 

procedures; and including the development of metrics to measure compliance. 

4. Replace the Written Agreement Requirement in Proposed Rule 15c6-2 with 

a Principles-Based Approach 

The Commission received comment letters from the Investment Company Institute (ICI) and 

from the American Securities Association (ASA) that advocate for a principles-based approach 

that allows broker-dealers to adopt their own internal policies that promote the allocation, 

confirmation and affirmation of trades for relevant customers.  That would include, according to 

ICI, a requirement that broker-dealers adopt policies and procedures “reasonably designed” to 

ensure that allocations, confirmations, and affirmations are completed on a timeline that allows 

settlement on T+1. 

The Commission is mindful that each broker-dealer is best suited to assess the challenges 

that it faces in accelerating the settlement process.  Therefore, as already discussed, the 

Commission is providing broker-dealers with the additional choice of a policies and procedures 

alternative besides the written agreements requirement.  The Commission believes that the policies 

and procedures alternative affords broker-dealers sufficient flexibility without sacrificing the main 



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objective of the rule, which is solving the collective action problem of improving the overall 

current affirmation rates of 68%.  A principles-based approach relies almost exclusively on the 

existing commercial incentives discussed on Part III.B.1, which the Commission already 

considered insufficient to overcome the incremental gains in same-day affirmation rates to date. 

5. Select a Later Implementation Date for Adoption of the Rule 

The Commission received a number of comment letters708 that recommend a later date than 

the proposed implementation date of March 31, 2024.  Reasons given by the industry for more 

time include the additional convenience attendant to a transition to T+1 settlement over a three-day 

weekend (e.g., Memorial Day, Labor Day); the possibility of coordinating the T+1 settlement 

transition with a closely aligned market (i.e., Canada on Labor Day 2024); and the ability to have 

more thorough preparation and testing protocols, among others.   

The Commission acknowledges that there are additional costs to an earlier transition date, 

as a more compressed timeline to implementation will have an opportunity cost over scarce 

operational resources.  Additional time also allows for more robust preparation and testing.709  

Nevertheless, postponing the implementation of T+1 settlement delays the realization of the 

market-wide benefits of the rule.  While there may be increases in up-front costs from an earlier 

date, there are also benefits attendant to general reductions in liquidity, credit and market risk.   

                                                 
708 See, e.g., DTCC Letter, supra note 16, at 4; SIFMA April Letter, supra note 16, at 4; State 

Street Letter, supra note 16, at 5; MFA Letter, supra note 16, at 2; ICI Letter, supra note 16, at 2; 

AGC April Letter, supra note 16, at 4; CCMA April Letter, supra note 16, at 1; RMA Letter, supra 

note 16, at 8; IAA April Letter, supra note 16, at 2; IIAC Letter, supra note 16, at 2; ASA Letter, 

supra note 16, at 1-2; OCC Letter, supra note 16, at 3; STA Letter, supra note 16, at 2. 

709  See supra Part VII.A.   



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Periods of high volatility could materialize on any date between the implementation date and any 

of the suggested dates, and such occurrence would reduce the benefits of the rule precisely at the 

moment when it is most useful.  Given the extent of planning, operational changes, and testing 

necessary to achieve a successful and orderly transition to a T+1 standard settlement cycle,710 the 

Commission is moving the compliance date to Tuesday, May 28, 2024, which follows a Federal 

holiday for which both markets and banks will be closed, providing market participants with a 

three-day weekend to facilitate the transition to a T+1 standard settlement cycle, and providing 

market participants an additional two months.  The Commission believes that a May 28, 2024, 

compliance date will ensure an orderly transition to a T+1 standard settlement cycle that realizes 

the substantial benefits of shortening the settlement cycle as soon as possible. 

IX. Paperwork Reduction Act 

As discussed in the proposing release, Rule 17Ad-27 and the amendments to Rule 204-2(a) 

contain “collection of information” requirements within the meaning of the Paperwork Reduction 

Act of 1995 (“PRA”).711  The Commission submitted the proposed collections of information to 

the Office of Management and Budget (“OMB”) for review in accordance with the PRA.  For the 

amendments to Rule 204-2(a), the title of the information collection is “Rule 204-2 under the 

Investment Advisers Act of 1940” (OMB Control No. 3235-0278).  For Rule 17Ad-27, the title of 

the information collection is “Shortening the Securities Transaction Settlement Cycle” (OMB 

Control No. 3235-0799).712  In addition, the modifications to Rule 15c6-2 contain “collection of 

                                                 
710  Id. 

711  See 44 U.S.C. 3501 et seq. 

712  The T+1 Proposing Release stated that the Commission intended to include Rule 17Ad-27 

in an existing information collection, “Clearing Agency Standards for Operation and Governance” 



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information” requirements, which will be submitted to OMB for review in accordance with the 

PRA.  An agency may not conduct or sponsor, and a person is not required to respond to, a 

collection of information unless it displays a currently valid OMB control number. 

The Commission received several comments concerning its PRA estimates for the 

proposed amendment to Rule 204-2, which are discussed below.  In response to these comments, 

and in view of the changes between the proposed and adopted recordkeeping requirements, the 

Commission is modifying its PRA estimates, as reflected in Part IX.A.  The Commission is also 

modifying its PRA estimates for Rule 17Ad-27 in view of the changes between the proposed and 

adopted rule requirements, as explained in Part IX.B.  In addition, the Commission corrects a 

tabulation error for Rule 17Ad-27 that was included in the T+1 Proposing Release. 

Finally, because the modifications to Rule 15c6-2 discussed in Part III.C would impose 

PRA burdens, the Commission below provides PRA estimates for Rule 15c6-2.  The Commission 

will submit these burdens to OMB for review in accordance with the PRA.713 

A. Advisers Act Rule 204-2 

Under section 204 of the Advisers Act, investment advisers registered or required to 

register with the Commission under section 203 of the Advisers Act must make and keep for 

prescribed periods such records (as defined in section 3(a)(37) of the Exchange Act), furnish 

copies thereof, and make and disseminate such reports as the Commission, by rule, may prescribe 

as necessary or appropriate in the public interest or for the protection of investors.  Advisers Act 

                                                 

(OMB Control No. 3235-0695).  The Commission has subsequently determined to request a new 

OMB Control Number for the collection of information in Rule 17Ad-27. 

713  See supra note 712 and accompanying text (providing the title of the information collection 

and the OMB control number for these rulemakings, “Shortening the Securities Transaction 

Settlement Cycle” (OMB Control No. 3235-0799)). 



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Rule 204-2 sets forth the requirements for maintaining and preserving specified books and records.  

This collection of information is found at 17 CFR 275.204-2 and is mandatory.  The Commission 

staff uses the collection of information in its regulatory and examination program.  Responses to 

the requirements of the proposed amendments to Rule 204-2 that are provided to the Commission 

in the context of its regulatory and examination program are kept confidential subject to the 

provisions of applicable law.714  

The final amendments to Rule 204-2 will require all registered investment advisers to make 

and keep certain records with respect to any securities transaction that is subject to the 

requirements of Rule 15c6-2(a). Those records include each confirmation received, and any 

allocation and each affirmation sent or received, with a date and time stamp for each allocation and 

affirmation that indicates when the allocation and affirmation were sent or received.   

The proposed amendments to Rule 204-2 would have required recordkeeping by any 

registered adviser that is a party to a contract under proposed Rule 15c6-2 while the final rule 

references more specifically transactions subject to Rule 15c6-2(a), although both concern the 

same subset of transactions. We estimate that 12,991 advisers, or 86% of the total registered 

advisers subject to amended Rule 204-2, will facilitate transactions subject to Rule 15c6-2(a) and 

thus be subject to the amendments.715 As discussed in the T+1 Proposing Release, the Commission 

stated that based on staff experience, it believed that many advisers already have processes in place 

to make and keep records of confirmations received, and allocations and affirmations sent as part 

of their customary and usual business practices, though recognizing that some small and mid-sized 

                                                 
714  See section 210(b) of the Advisers Act, 15 U.S.C. 80b–10(b). 

715  Based on Form ADV data as of June 2022. See also infra note 4 to Table 2. 



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advisers do not currently retain these records, and some advisers still maintain certain records in 

paper and/or communicate by telephone.716  Paper records are less likely to be date and time 

stamped, and those communicated by telephone are not date or time-stamped at all, unless a 

memorial of the communication is retained). The Commission also stated that it believed many 

such records are electronically maintained, and are sent or received electronically, in which case 

such documents were already date and time stamped in many instances.717 

Some commenters discussed aspects of the burden estimates for the proposed amendments 

to Rule 204-2.  One commenter stated that the Commission has underestimated the time and cost 

burdens for implementing the proposed recordkeeping requirements but did not provide specific 

estimates.718  As one basis for that statement, the commenter explained that most investment 

advisers use third parties to perform or communicate allocations or affirmations, and do not 

necessarily currently retain the records themselves.719  This commenter stated that if such advisers 

were required to retain those records on an ongoing basis, they would likely incur costs associated 

with directing the third parties to electronically copy the investment adviser on any allocations or 

affirmations and ensuring that their own systems and infrastructure could adequately accommodate 

these additional records.  The commenter suggested that if advisers could not rely on third parties 

                                                 
716  See T+1 Proposing Release, supra note 2, at 10494. 

717  See T+1 Proposing Release, supra note 2, at 10456–57, 10490, 10494.  

718  See IAA April Letter, supra note 16, at 7.  

719  Id. (noting the Commission’s estimate in the T+1 Proposing Release that 70 percent of 

investment adviser trades are affirmed by their custodian is consistent with information received 

from IAA members, and also noting that advisers may utilize separately managed accounts where 

trading and allocations are conducted by a third-party investment manager under an agreement 

with the investment adviser). 



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to meet their recordkeeping obligations, the Commission should update its estimates, while also 

asking the Commission to review the potential cost savings associated with allowing advisers to 

use third parties to retain the required records.720  In this regard, we note that investment advisers 

may continue to rely on third parties to meet their recordkeeping obligations, including those 

required by the final amendments to Rule 204-2.721   

Several comments also addressed timestamping. One suggested that the costs could be 

higher than we estimated in the proposal,722 while another stated that timestamps are already 

included in electronic communications protocols.723  We agree, consistent with the latter comment, 

that timestamps are generally included in many electronic communications and many advisers 

currently send allocations and affirmations electronically.   

In a change from the proposal, we estimate that each adviser that will be subject to the new 

recordkeeping requirements will incur an additional three-hour burden each year, increased from 

two hours as proposed. We are not amortizing any of the burdens as proposed, because we believe 

investment advisers that will be subject to the new requirements will incur the same hour burden 

initially and then annually thereafter.724   

                                                 
720  Id. 

721  See supra Part IV.C.  As previously noted, we estimate that 70% of trades are affirmed by 

custodians, which may retain the affirmations on the adviser’s behalf. 

722  AIMA Letter, supra note 29. 

723  FIX Trading Letter, supra note 218. 

724  The T+1 Proposing Release amortized the annual two-hour burden over three years, 

resulting in an annual internal burden of 0.667 hours per adviser per year. 



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The Commission estimates that 12,991 registered advisers will be subject to the new 

recordkeeping requirements because they manage institutional accounts and are thus likely to 

facilitate transactions that are subject to the requirements of Rule 15c6-2(a).725 This estimate takes 

into account potential additional burdens associated with the new recordkeeping requirement for 

advisers that do not currently make and retain these records, but will be required to do so under the 

final rule. The revised estimates are also designed to address any burdens for advisers that may 

make and retain such documents, but do not do so electronically and/or do not time and date stamp 

such documents or otherwise retain the documents in a way that complies with the final rule.  In 

addition, the revised estimates factor in any costs associated with receiving copies of, or having 

access to, required records that are retained by a custodian or other third-party, offset by cost-

savings associated with the adviser’s ability to rely on third parties to meet its recordkeeping 

obligations under the rule. As discussed above, we believe that many advisers already have 

recordkeeping processes in place to retain the new required records, and may only incur minimal 

                                                 
725  The Commission is using a different methodology than the proposal in order to simplify the 

calculation and include more advisers that we estimate will be subject to the new recordkeeping 

requirement. The final estimate includes one category of 12,991 advisers that will be subject to the 

new recordkeeping requirements because they manage institutional accounts and are thus likely to 

facilitate transactions that are subject to the requirements of Rule 15c6-2(a). The estimate excludes 

advisers that only have individuals or high-net-worth individuals as clients in Item 5.D. and do not 

report participation in any wrap fee program in Item 5.I., and advisers that do not report any 

regulatory assets under management in Item 5.F. In contrast, the T+1 Proposing Release estimated 

11,283 of advisers that are subject to Rule 204-2, would enter a contract with a broker or dealer 

under proposed Rule 15c6-2 and therefore be subject to the related proposed recordkeeping 

amendment. The estimate included three categories of advisers that would have had the same 

burden hours: (1) 220 small and mid-size advisers that have institutional clients that we believed 

do not maintain the proposed records; (2) 113 advisers that have institutional clients that staff 

estimated do not send allocations or affirmations; and (3) 7,898 advisers with institutional clients 

that the staff estimated make institutional trades that are affirmed by custodians and therefore do 

not maintain the proposed affirmations.  



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additional burdens to comply with the final recordkeeping requirements. However, some advisers 

may need to spend more time to modify their recordkeeping systems. Accordingly, the three-hour 

burden estimate reflects an average across all advisers likely to be subject to the new requirements. 

Finally, in response to the comment that our staffing cost estimates were too low, we have 

increased the hours burden to three and the time we estimate the compliance clerk and general 

clerk will spend on the collection of information, and we updated the wage rates to account for 

inflation.726 

In our most recently approved Paperwork Reduction Act submission for Rule 204-2, we 

estimated for Rule 204-2 a total annual aggregate hour burden of 2,764,563 hours, and a total 

annual aggregate internal cost burden of $175,980,426.727  The estimated additional burdens 

associated with the final amendments to Rule 204-2, which take into account an increase in annual 

hour burdens and internal cost burdens due to the comments received and an increase in the 

internal wage rates due to an updated inflation adjustment reflecting inflation through the end of 

2022, are reflected in the table below.  

Table 2.  Summary of burden estimates for the final amendments to Rule 204-2. 

Advisers Annual internal 

hour burden1 

Internal 

Wage rate2 

Internal time cost per year3 

 

 

12,991 advisers4 

3 hours per adviser5 

 

Incremental aggregate 

burden = 38,973 hours 

(12,991 advisers x 3 hours = 

38,973 hours) 

 

 

$77.50 

 per hour 

 

 

Incremental aggregate internal cost = 

$3,020,408 

($77.5 x 38,973 hours = 

$3,020,408) 

 

   

 2,764,563 aggregate hours 

per year 

 

$175,980,426 

                                                 
726  The wage rate estimate takes into account an updated inflation adjustment since the 

proposal and estimates that the higher paid compliance clerk will spend approximately 50% of the 

time performing the function instead of 17% as estimated in the T+1 Proposing Release.  

727  Supporting Statement for the Paperwork Reduction Act Information Collection Submission 

for Revisions to Rule 204-2, OMB Report, OMB 3235-0278 (Aug. 2021). 



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Currently approved 

aggregate burden6 

 
 

Estimated revised 

aggregate burden7 

 

2,803,536 aggregate hours 

per year 

 

 

$179,000,8348 

 

Notes: 

1.  In a change from the Proposing Release, we are not amortizing the initial internal hour burden over a three-year period. Instead, 

we believe that the estimated internal hour burdens associated with the final amendments will be annual burdens.   

2.  As with our estimates relating to the previous amendments to Advisers Act Rule 204-2, the Commission expects that 

performance of these functions will most likely be allocated between compliance clerks and general clerks.  Data from SIFMA's 

Office Salaries in the Securities Industry 2013, modified by Commission staff to account for an 1800-hour work-year and inflation 

through the end of 2022, and multiplied by 2.93 to account for bonuses, firm size, employee benefits and overhead, suggest that 

costs for these position are $82 and $73, respectively.  A blended hourly rate is therefore: ($82 + $73) ÷ 2 = $77.5 per hour.   

3.  Under the currently-approved PRA for Rule 204-2, there is no cost burden other than the internal cost of the hour burden 

described herein, and we believe that the amendments will not result in any external cost burden. 

4. We estimate there were 15,160 total registered advisers as of June 2022 based on Form ADV filings received through the 

Investment Adviser Registration Depository (IARD) through August 31, 2022.  Of these 15,160 advisers, we estimate that 12,991 

will be subject to the new recordkeeping requirements because they manage institutional accounts and are thus likely to facilitate 

transactions that are subject to the requirements of Rule 15c6-2(a).  We have excluded advisers that only have individuals or high-

net-worth individuals as clients in Item 5.D. and do not report participation in any wrap fee program in Item 5.I.  We also excluded 

advisers that do not report any regulatory assets under management in Item 5.F. 

5.  We estimate an average of three hours per adviser to update procedures and instruct personnel to make and retain the required 

records in the advisers’ recordkeeping systems, including any such documents it may receive in paper format and does not currently 

retain, and to actually retain those records for the required retention periods. Because we believe that many advisers already have 

recordkeeping systems to accommodate these records, which include, at a minimum, spreadsheet formats and email retention 

systems that have an ability to capture a date and time stamp, such advisers are likely to incur minimal incremental costs associated 

with the new recordkeeping requirement.   

6.  See supra note 727. 

7.  The new recordkeeping burden will add 38,973 aggregate annual hours, resulting in a revised estimate of 2,803,536 aggregate 

hours for all registered advisers subject to these amendments to Rule 204-2 (2,764,563 current hours + 38,973 additional hours = 

2,803,536 aggregate hours per year). The new recordkeeping burden would also add $3,020,408 in aggregate internal costs, 

resulting in a revised estimate of $179,000,834 in aggregate internal costs ($175,980,426 current internal costs + $3,020,408 

additional internal costs = $179,000,834). 

8. This reflects a reduction in the internal time cost per year that appeared in the T+1 Proposing Release, to account for corrections 

to the internal time costs calculations as they appeared in the T+1 Proposing Release. 

B. Exchange Act Rule 17Ad-27 

As discussed in the T+1 Proposing Release, the purpose of the collections under Exchange 

Act Rule 17Ad-27 is to ensure that CMSPs facilitate the ongoing development of operational and 

technological improvements associated with the straight-through processing of institutional trades.  

The collections are mandatory.  To the extent that the Commission receives confidential 



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information pursuant to this collection of information, such information would be kept confidential 

subject to the provisions of applicable law.728 

Respondents under this rule are the three CMSPs to which the Commission has granted an 

exemption from registration as a clearing agency, as previously discussed in the T+1 Proposing 

Release.  The Commission also continues to anticipate that one additional entity may seek to 

become a CMSP in the next three years, and so for purposes of this PRA collection the 

Commission has assumed four respondents. 

As discussed in Part V.C.1, Rule 17Ad-27(a) requires a CMSP to establish, implement, 

maintain, and enforce written policies and procedures reasonably designed to facilitate straight-

through processing.  Although the Commission has modified the text of Rule 17Ad-27(a) to 

provide that such policies and procedures be “reasonably designed,” the Commission believes that 

the initial burden under this portion of the rule is unchanged.  As discussed in the T+1 Proposing 

Release, the Commission continues to estimate that respondent CMSPs would incur an aggregate 

one-time burden of approximately 56 hours to create such new policies and procedures,729 and that 

the aggregate cost of this one time burden would be $27,600.730 

                                                 
728  See, e.g., 5 U.S.C. 552 et seq.  Exemption 4 of the Freedom of Information Act provides an 

exemption for trade secrets and commercial or financial information obtained from a person and 

privileged or confidential.  See 5 U.S.C. 552(b)(4).  Exemption 8 of the Freedom of Information 

Act provides an exemption for matters that are contained in or related to examination, operating, or 

condition reports prepared by, on behalf of, or for the use of an agency responsible for the 

regulation or supervision of financial institutions.  See 5 U.S.C. 552(b)(8). 

729  This figure was calculated as follows: (Assistant General Counsel for 8 hours + 

Compliance Attorney for 6 hours) = 14 hours x 4 respondent CMSPs = 56 hours.  

730  This figure was calculated as follows: (Assistant General Counsel at $543/hour x 8 hours = 

$4,344) + (Compliance Attorney at $426/hour x 6 hours = $2,556) = $6,900 x 4 CMSPs equals 

$27,600.   



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Rule 17Ad-27 also imposes ongoing burdens on a respondent CMSP as follows: (i) 

ongoing monitoring and compliance activities with respect to the written policies and procedures 

required by the proposed rule; and (ii) ongoing documentation activities with respect to the 

required annual report.  As discussed in Part V.C.2, the Commission has modified the final rule to 

identify specific data elements to be included in the annual report.  To accommodate the 

documentation and reporting of such data as contemplated in final Rule 17Ad-27(b), the 

Commission has revised its estimates such that the ongoing activities required by Rule 17Ad-27 

would now impose an aggregate annual burden on respondent CMSPs of 148 hours,731 with an 

internal aggregate cost (or monetized value of the hour burden) of $65,208.732  The total industry 

internal cost is estimated to be $92,808.733 

Table 3.  Summary of burden estimates for Rule 17Ad-27.734 

                                                 
731  This figure was calculated as follows: (Compliance Attorney for 24 hours + Computer 

Operations Manager for 10 hours) = 34 hours x 4 respondent CMSPs = 136 hours.  In the T+1 

Proposing Release, the number of hours for a Compliance Attorney was incorrectly stated as “25 

hours” as opposed to “24 hours.”  See T+1 Proposing Release, supra note 2, at 10495 n.433.  As 

discussed previously, supra note 671, the Commission estimates that the Inline XBRL requirement 

will require respondent CMSPs to incur three additional ongoing burden hours to apply and review 

Inline XBRL tags, as follows: (Compliance Attorney for 3 hours) x 4 CMSPs = 12 hours.  Taken 

together, the total ongoing burden is 148 hours (136 hours + 12 hours = 148 hours).   

732  This figure was calculated as follows: (Compliance Attorney at $426/hour x 24 hours = 

$10,224) + (Computer Operations Manager at $514/hour x 10 hours = $5,140) = $15,364 x 4 

CMSPs = $61,456.  The Commission also estimates the costs associated with the three burden 

hours associated with applying and reviewing Inline XBRL tags are as follows: (Compliance 

Attorney at $426/hour x 3 hours = $1,278) x 4 CMSPs = $5,112.  Taken together, the total amount 

is $65,208 ($60,096 + $5,112 = $65,208). 

733  This figure was calculated as follows: $27,600 (industry one-time burden) + $65,208 

(industry ongoing burden) = $92,808.   

734  The T+1 Proposing Release incorrectly stated the amount for the total annual burden per 

respondent (91 hours) and the total annual industry burden (364 hours) because the initial burden 

used to calculate those amounts should have been annualized to 18.67 hours.  The estimates have 



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Name of 

Information 

Collection  

Type of 

Burden 

Number of 

Respondents 

Number of 

Annual 

Responses per 

Respondent 

Initial 

Burden Per 

Respondent 

Annualized 

Initial 

Burden per 

Respondent 

Ongoing 

Burden Per 

Respondent 

Total Annual 

Burden Per 

Respondent 

Total Annual 

Industry 

Burden 

17Ad-27 Recordkeeping 4 1 14735 4.67 37 41.67 166.67 

Total Aggregate Burden for All Respondents 166.67 hours 

 

C. Exchange Act Rule 15c6-2 

As proposed, Exchange Act Rule 15c6-2 did not create any PRA burdens, so the T+1 

Proposing Release did not estimate PRA burdens for the proposed rule.  As discussed in Part III.C, 

the Commission is modifying the proposed rule at adoption to incorporate affirmative 

recordkeeping obligations, as explained below. 

1. Summary and Proposed Use of Information 

Rule 15c6-2(a) requires any broker or dealer engaging in the allocation, confirmation, or 

affirmation process with another party or parties to achieve settlement of a securities transaction 

that is subject to the requirements of Rule 15c6-1(a) to either: (1) enter into a written agreement 

with the relevant parties to ensure completion of the allocation, confirmation, affirmation, or any 

combination thereof, for the transaction as soon as technologically practicable and no later than the 

end of the day on trade date in such form as necessary to achieve settlement of the transaction; or 

                                                 

been corrected in Table 3 for this adopting release and reflect the PRA estimates that the 

Commission provided to OMB for this rulemaking. 

735  In the T+1 Proposing Release, Table 2: Summary of burden estimates for Rule 17Ad-27 

erroneously stated the total industry initial burden of 56 hours instead of the initial burden per 

entity of 14 hours.  See T+1 Proposing Release, supra note 2, at 10496.  The remaining entries in 

the table in this release have been updated accordingly.Conformed to Federal Register version 

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(2) establish, maintain, and enforce written policies and procedures reasonably designed to ensure 

completion of the allocation, confirmation, affirmation, or any combination thereof, for the 

transaction as soon as technologically practicable and no later than the end of the day on trade date 

in such form as necessary to achieve settlement of the transaction.736 

Pursuant to Rule 15c6-2(b), to ensure completion of the allocation, confirmation, 

affirmation, or any combination thereof for the transaction as soon as technologically practicable 

and no later than the end of the day on trade date, written policies and procedures required by 

paragraph (a)(2) of this section shall: (1) identify and describe any technology systems, operations, 

and processes that the broker or dealer uses to coordinate with other relevant parties, including 

investment advisers and custodians, to ensure completion of the allocation, confirmation, or 

affirmation process for the transaction; (2) set target time frames on trade date for completing the 

allocation, confirmation, and affirmation for the transaction; (3) describe the procedures that the 

broker or dealer will follow to ensure the prompt communication of trade information, investigate 

any discrepancies in trade information, and adjust trade information to help ensure that the 

allocation, confirmation, and affirmation can be completed by the target time frames on trade date; 

(4) describe how the broker or dealer plans to identify and address delays if another party, 

including an investment adviser or a custodian, is not promptly completing the allocation or 

affirmation for the transaction, or if the broker or dealer experiences delays in promptly 

completing the confirmation; and (5) measure, monitor, document the rates of allocations, 

confirmations, and affirmations completed as soon as technologically practicable and no later than 

the end of the day on trade date.737 

                                                 
736  17 CFR 240.15c6-2(a). 

737  17 CFR 240.15c6-2(b). 



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The purpose of this information collection is to ensure that the parties to institutional 

transactions—that is, transactions where a broker-dealer or its customer must engage with agents 

of the customer, including the customer’s investment adviser or its securities custodian, to prepare 

a transaction for settlement—can ensure the completion of the allocation, confirmation, and 

affirmation process as soon as technologically practicable and no later than the end of the day on 

trade date.738  This objective, commonly referred to as “same-day affirmation,” has been a 

longstanding goal of the securities industry and one that can help ensure the timely and orderly 

settlement of securities transactions.739   

Rule 15c6-2 provides broker-dealers with two compliance alternatives that would create a 

recordkeeping burden: (i) entering into written agreements pursuant to Rule 15c6-2(a)(1) or (ii) 

establishing, maintaining, and enforcing written policies and procedures pursuant to Rule 15c6-

2(a)(2).  Based on the comments received regarding the costs and challenges associated with 

entering into such written agreements under the rule, the Commission believes that broker-dealers 

are unlikely to enter into new written agreements specifically for the purpose of achieving 

compliance with Rule 15c6-2(a)(1) if they do not already have written agreements to manage their 

commercial relationships.  Moreover, as discussed in Part III.B.5, a broker-dealer may choose to 

update existing agreements and commercial arrangements to achieve compliance with Rule 15c6-

2(a)(1);740 however, the Commission believes that broker-dealers are likely to choose to comply 

                                                 
738  See supra Part III. 

739  See id.; see also T+1 Proposing Release, supra note 2, at 10452–53.  

740  The existing requirements of 17 CFR 240.17a-4(b)(7) (“Rule 17a-4(b)(7)”) under the 

Exchange Act already require a broker or dealer to preserve all written agreements (or copies 

thereof) entered into by a member, broker or dealer relating to its business as such, including 

agreements with respect to any account.  See 17 CFR 240.17a-4(b)(7). 



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with the policies and procedures requirement under Rule 15c6-2(a)(2) if the costs and challenges 

(i.e., for PRA purposes, the associated hour burdens) associated with updating existing agreement 

or arrangements would be higher than those associated with the policies and procedures 

requirement.  For purposes of preparing this PRA analysis, the Commission assumes that all 

respondent broker-dealers will seek to achieve compliance with Rule 15c6-2 by establishing, 

maintaining, and enforcing policies and procedures consistent with Rule 15c6-2(a)(2).741 

2. Respondents 

As of December 31, 2021, 3,508 broker-dealers were registered with the Commission.742  

Of those, approximately 143 broker-dealers are participants of the DTC,743 a clearing agency 

registered with the Commission that provides central securities depository services for transactions 

in U.S. equity securities.  Participants in DTC can facilitate the settlement of securities transactions 

on behalf of their customers.  For example, broker-dealers that participate in DTC are often 

referred to as “clearing brokers” within the securities industry.  In addition to broker-dealers, DTC 

participants include bank custodians that may also hold securities on behalf of institutional 

customers.  Among other things, DTC facilitates the settlement of securities transactions using the 

delivery-versus-payment (“DVP”) and receipt-versus-payment (“RVP”) methods, both of which 

are commonly used by buyers and sellers to settle an institutional transaction once the parties have 

                                                 
741  To the extent some broker-dealers choose to update their existing agreements and 

arrangements to achieve compliance with Rule 15c6-2(a)(1) because the associated costs and 

challenges (i.e., for PRA purposes, the hour burdens) would be lower than those associated with 

the policies and procedures requirement, then the actual hour burden for this collection of 

information requirement in Rule 15c6-2 may be less than the estimated hour burden. 

742  This estimate is derived from FOCUS Report data as of December 31, 2021. 

743  See DTCC, DTC Member Directories, https://www.dtcc.com/client-center/dtc-directories 

(last updated Dec. 30, 2022).  

https://www.dtcc.com/client-center/dtc-directories


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completed the allocation, confirmation, and affirmation process.  Because DTC is the only clearing 

agency that provides central securities depository services for U.S. equities, the Commission 

believes that the set of participants at DTC that are broker-dealers are a useful, if partial, estimate 

of broker-dealers that participate in the allocation, confirmation, and affirmation process and 

therefore of broker-dealers that would be subject to the requirements of Rule 15c6-2. 

In addition, other broker-dealers may participate in the allocation, confirmation, and 

affirmation process but, because they do not maintain status as a participant in DTC, rely on 

commercial relationships with DTC participants (i.e., clearing brokers) to facilitate final settlement 

of their institutional transactions.  Using annual statistics compiled by the Financial Industry 

Regulatory Authority (“FINRA”), the Commission estimates that approximately 268 additional 

broker-dealers may serve institutional customers.744  Accordingly, the Commission estimates that 

approximately 411 broker-dealers would be subject to the requirements of Rule 15c6-2. 

3. Total Initial and Annual Reporting Burdens 

The extent to which a respondent will be burdened by the proposed collection of 

information under Rule 15c6-2 will depend on two factors: (1) the extent to which the broker-

dealer determines that its policies and procedures, as opposed to its written agreements, will be 

required to demonstrate compliance with the rule; and (2) the extent to which existing policies and 

procedures for ensuring timely settlement would need to be modified to address same-day 

affirmation.  As a general matter, most broker-dealers maintain policies and procedures to ensure 

                                                 
744  Specifically, statistics compiled by FINRA suggest that approximately 256 small firms and 

12 medium-sized firms in the “Trading and Execution” category perform “Institutional 

Brokerage.” FINRA, 2022 FINRA Industry Snapshot 33, 34 (2022), 

https://www.finra.org/sites/default/files/2022-03/2022-industry-snapshot.pdf. 

https://www.finra.org/sites/default/files/2022-03/2022-industry-snapshot.pdf


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the timely settlement of their transactions,745 and the securities industry considers achieving 

“same-day affirmation” an industry best practice.746  Nonetheless, the Commission believes that 

respondent broker-dealers will need to evaluate existing policies and procedures, identify any gaps, 

and then update their policies and procedures to address any gaps identified.  Accordingly, the 

Commission estimates that respondent broker-dealers would incur an aggregate one-time burden of 

approximately 240 hours to create policies and procedures required under the rule,747 and that the 

internal cost (or monetized value of the hour burden) of this one-time burden per broker-dealer 

would be $88,880.748   

Rule 15c6-2 also imposes ongoing burdens on a respondent broker-dealer as follows: (i) 

ongoing monitoring and compliance activities with respect to the written policies and procedures 

required by the rule; and (ii) ongoing documentation activities with respect to its obligations to 

measure, monitor, and document the rates of allocations, confirmations, and affirmations 

completed as soon as technologically practicable and no later than the end of the day on trade date.  

The Commission estimates that the ongoing activities required by Rule 15c6-2 would impose an 

                                                 
745  See, e.g., SIFMA August 26th Letter, supra note 207, at 2. 

746  See supra Part III.B.1. 

747  This figure was calculated as follows: (Assistant General Counsel for 20 hours + 

Compliance Attorney for 120 hours + Senior Risk Management Specialist for 20 hours + Risk 

Management Specialist for 80 hours) = 240 hours x 411 respondents = 98,640 hours.  

748  This figure was calculated as follows: (Assistant General Counsel at $543/hour x 20 hours 

= $10,860) + (Compliance Attorney at $426/hour x 120 hours = $51,120) + (Senior Risk 

Management Specialist at $417/hour x 20 hours = $8,340) + (Risk Management Specialist at 

$232/hour x 80 hours = $18,560) = $88,880 x 411 respondents = $36,529,680.   



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aggregate annual burden on respondent broker-dealers of 480 hours,749 and an internal cost (or 

monetized value of the hour burden) per broker-dealer of $172,416.750  The total industry internal 

cost is estimated to be approximately $107M.751 

Table 4.  Summary of burden estimates for Rule 15c6-2. 

Name of 

Information 

Collection  

Type of 

Burden 

Number of 

Respondents 

Number of 

Annual 

Responses per 

Respondent 

Initial 

Burden Per 

Respondent 

Annualized 

Initial 

Burden per 

Respondent 

Ongoing 

Burden Per 

Respondent 

Total Annual 

Burden Per 

Respondent 

Total Annual 

Industry 

Burden 

15c6-2 Recordkeeping 411 1 240 hours 80 480 hours 560 hours 230,160 hours 

Total Aggregate Burden for All Respondents 230,160 hours 

 

4. Collection of Information is Mandatory 

Where applicable, the collection of information pursuant to Rule 15c6-2 is mandatory. 

5. Confidentiality 

Where the Commission requests that a broker-dealer produce records retained pursuant to 

the requirements of Rule 15c6-2, a broker-dealer can request confidential treatment of the 

                                                 
749  This figure was calculated as follows: (Assistant General Counsel for 48 hours + 

Compliance Attorney for 192 hours + Senior Risk Management Specialist for 48 hours + Risk 

Management Specialist for 192 hours) = 480 hours x 411 respondents = 197,280 hours. 

750  This figure was calculated as follows: (Assistant General Counsel at $543/hour x 48 hours 

= $26,064) + (Compliance Attorney at $426/hour x 192 hours = $81,792) + (Senior Risk 

Management Specialist at $417/hour x 48 hours = $20,016) + (Risk Management Specialist at 

$232/hour x 192 hours = $44,544) = $172,416 x 411 respondents = $70,862,976.   

751  This figure was calculated as follows: $36,529,680 (industry one-time burden) + 

$70,862,976 (industry ongoing burden) = $107,392,656.   



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information.752  If such confidential treatment request is made, the Commission anticipates that it 

will keep the information confidential subject to applicable law.753 

6. Retention Period 

Pursuant to Exchange Act Rule 17a-4(b)(7), a broker or dealer registered pursuant to 

section 15 of the Exchange Act must preserve for a period of not less than three years, the first two 

years in an easily accessible place, all written agreements (or copies thereof) entered into by such 

member, broker or dealer relating to its business as such, including agreements with respect to any 

account.754 

Pursuant to 17 CFR 240.17a-4(e)(7), a broker or dealer registered pursuant to section 15 of 

the Exchange Act must maintain and preserve in an easily accessible place each compliance, 

supervisory, and procedures manual, including any updates, modifications, and revisions to the 

manual, describing the policies and practices of the member, broker or dealer with respect to 

compliance with applicable laws and rules, and supervision of the activities of each natural person 

associated with the member, broker or dealer until three years after the termination of the use of 

the manual.755 

                                                 
752  See 17 CFR 200.83. Information regarding requests for confidential treatment of 

information submitted to the Commission is available on the Commission’s website at 

http://www.sec.gov/foia/howfo2.htm#privacy. 

753  See, e.g., 5 U.S.C. 552 et seq.; 15 U.S.C. 78x (governing the public availability of 

information obtained by the Commission). 

754  17 CFR 240.17a-4(b)(7). 

755  17 CFR 240.17a-4(e)(7). 

http://www.sec.gov/foia/howfo2.htm#privacy


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X. Regulatory Flexibility Act 

The Regulatory Flexibility Act (“RFA”) requires the Commission, in promulgating rules, to 

consider the impact of those rules on small entities.756  Section 603(a) of the Administrative 

Procedure Act,757 as amended by the RFA, generally requires the Commission to undertake a 

regulatory flexibility analysis of all proposed rules to determine the impact of such rulemaking on 

“small entities.”758  Section 605(b) of the RFA states that this requirement shall not apply to any 

proposed rule which, if adopted, would not have a significant economic impact on a substantial 

number of small entities.759  An Initial Regulatory Flexibility Analysis (“IRFA”) was prepared in 

conjunction with the T+1 Proposing Release, published in February 2022.  The T+1 Proposing 

Release included, and solicited comment on, the IRFA. 

A. Exchange Act Rules 15c6-1 and 15c6-2 

Below is the Final Regulatory Flexibility Analysis for the amendments to Rule 15c6-1 and 

new Rule 15c6-2, prepared in accordance with the RFA.   

1. Need for the Rules 

The Commission is adopting the amendments to Rule 15c6-1 to shorten the standard 

settlement cycle from two days to one day, offering market participants benefits that include 

                                                 
756  See 5 U.S.C. 601 et seq. 

757  5 U.S.C. 603(a). 

758  Section 601(b) of the RFA permits agencies to formulate their own definitions of “small 

entities.”  See 5 U.S.C. 601(b).  The Commission has adopted definitions for the term “small 

entity” for the purposes of rulemaking in accordance with the RFA.  These definitions, as relevant 

to this rulemaking, are set forth in 17 CFR 240.0-10. 

759  See 5 U.S.C. 605(b). 



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reduced exposure to credit, market, and liquidity risk, as well as related reductions to overall 

systemic risk.  These benefits have been previously discussed in detail in Parts II and VIII above.   

The Commission is adopting Rule 15c6-2 to establish requirements that facilitate the 

completion of allocations, confirmations, and affirmations by the end of the trade date, helping to 

facilitate the settlement of institutional transactions in a T+1 or shorter standard settlement cycle 

by promoting the timely and orderly transmission of trade data necessary to achieve settlement.  In 

addition, Rule 15c6-2 can foster continued improvements in institutional trade processing, which 

should in turn also further promote accuracy and efficiency, reduce the potential for settlement 

fails, and more generally, reduce the potential for operational risk.  These benefits have been 

previously discussed in detail in Parts III and VIII above.  

The amendments to Rule 15c6-1 and new Rule 15c6-2 each advance the objectives of 

section 15(c)(6), 17A, and 23(a) of the Exchange Act.760 

2. Summary of Significant Issues Raised by Public Comment 

As noted above in Part X.A, the T+1 Proposing Release solicited comment on the IRFA.  

Although the Commission received no comments specifically concerning the IRFA, multiple 

commenters discussed the costs and burdens for broker-dealers associated with Rules 15c6-1 and 

15c6-2.  These comments have been discussed in detail in Parts II and III, and the Commission has 

modified the proposed rules at adoption to address these comments and, in part, to minimize the 

effect on small entities, as discussed further in Part X.A.5 below. 

3. Description and Estimate of Small Entities 

Paragraph (c) of Rule 0-10 under the Exchange Act provides that, for purposes of 

Commission rulemaking in accordance with the provisions of the RFA, when used with reference 

                                                 
760  See 15 U.S.C. 78o(c)(6); 15 U.S.C. 78q-1; 15 U.S.C. 78w(a).  



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to a broker or dealer, the Commission has defined the term “small entity” to mean a broker or 

dealer: (1) with total capital (net worth plus subordinated liabilities) of less than $500,000 on the 

date in the prior fiscal year as of which its audited financial statements were prepared pursuant to 

Rule 17a-5(d) under the Exchange Act,761 or if not required to file such statements, a broker-dealer 

with total capital (net worth plus subordinated liabilities) of less than $500,000 on the last business 

day of the preceding fiscal year (or in the time that it has been in business, if shorter); and (2) is 

not affiliated with any person (other than a natural person) that is not a small business or small 

organization.762   

The amendments to Rule 15c6-1 and new Rule 15c6-2 each establish requirements that 

apply to broker-dealers, including those that are small entities.  Based on FOCUS Report data, the 

Commission estimates that, as of June 30, 2022, approximately 1,393 broker-dealers might be 

deemed small entities for purposes of this analysis. 

4. Projected Reporting, Recordkeeping, and Other Compliance Requirements 

The amendments to Rule 15c6-1 do not impose any new reporting or recordkeeping 

requirements on broker-dealers that are small entities.  However, the amendments to Rule 15c6-1 

may impact certain broker-dealers, including those that are small entities, to the extent that broker-

dealers may need to make changes to their business operations and incur certain costs in order to 

operate in a T+1 environment.   

For example, implementing a T+1 standard settlement cycle may require broker-dealers, 

including those that are small entities, to make changes to their business practices, as well as to 

                                                 
761  17 CFR 240.17a-5(c). 

762  17 CFR 240.0-10(d). 



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their computer systems, and/or to deploy new technology solutions.  Implementation of these 

changes may require broker-dealers to incur new or increased costs, which may vary based on the 

business model of individual broker-dealers as well as other factors.763 

Additionally, implementing a T+1 standard settlement cycle may result in an increase in 

costs to certain broker-dealers who finance the purchase of customer securities until the broker-

dealer receives payment from its customers.  To pay for securities purchases, many customers 

liquidate other securities or money fund balances held for them by their broker-dealers in 

consolidated accounts such as cash management accounts.  However, some broker-dealers may 

elect to finance the purchase of customer securities until the broker-dealer receives payment from 

its customers for those customers that do not choose to liquidate other securities or have a 

sufficient money fund balance prior to trade execution to pay for securities purchases.  Broker-

dealers that elect to finance the purchase of customer securities may incur an increase in costs in a 

T+1 environment resulting from settlement occurring one day earlier unless the broker-dealer can 

expedite customer payments. 

Comments directed to the burdens and costs associated with Rule 15c6-1 have been 

discussed in Part II. 

As modified at adoption and as previously discussed in detail in Part III, Rule 15c6-2 

imposes recordkeeping requirements on broker-dealers that are small entities because it includes a 

requirement to establish, maintain, and enforce written policies and procedures reasonably 

designed to ensure the completion on trade of trade allocations, confirmations, and affirmations for 

their institutional trades.  In addition, the rule may impact certain broker-dealers, including those 

                                                 
763  See supra Part VIII.C.2 (further discussing how large customers of third-party providers 

have market power that may enable them to avoid internalizing costs, while small customers in a 

weaker negotiating position relative to their service providers may bear the bulk of these costs). 



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that are small entities, to the extent that broker-dealers may need to make changes to their business 

operations and incur certain costs in order to implement such policies and procedures.  These 

efforts may require broker-dealers, including those that are small entities, to make changes to their 

business practices, as well as to their computer systems, and/or to deploy new technology 

solutions.  Implementation of these changes may require broker-dealers to incur new or increased 

costs, which may vary based on the business model of individual broker-dealers as well as other 

factors. 

Comments directed to the burdens and costs associated with Rule 15c6-2 have been 

discussed in Part III. 

5. Description of Commission Actions to Minimize Effect on Small Entities 

As discussed in the IRFA, the Commission considered alternatives to the amendments to 

Rule 15c6-1 that would accomplish the stated objectives of the amendment without 

disproportionately burdening broker-dealers that are small entities, including: differing compliance 

requirements or timetables; clarifying, consolidating, or simplifying the compliance requirements; 

using performance rather than design standards; or providing an exemption for certain or all 

broker-dealers that are small entities.  The purpose of Rule 15c6-1 is to establish a standard 

settlement cycle for broker-dealer transactions.  Alternatives, such as different compliance 

requirements or timetables, or exemptions, for Rule 15c6-1, or any part thereof, for small entities 

would undermine the purpose of establishing a standard settlement cycle.  For example, allowing 

small entities to settle at a time later than T+1 could create a two-tiered market that could work to 

the detriment of small entities whose order flow would not coincide with that of other firms 

operating on a T+1 settlement cycle.  Additionally, the Commission believes that establishing a 

single timetable (i.e., compliance date) for all broker-dealers, including small entities, to comply 

with the amendment is necessary to ensure that the transition to a T+1 standard settlement cycle 



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takes place in an orderly manner that minimizes undue disruptions in the securities markets.764  

With respect to using performance rather than design standards, the Commission used performance 

standards to the extent appropriate under the statute.765  In addition, under the amendment, broker-

dealers have the flexibility to tailor their systems and processes, and generally to choose how, to 

comply with the rule. 

The Commission also considered alternatives to Rule 15c6-2 and, in response to the 

comments received, has modified the rule at adoption to provide a policies and procedures 

alternative, as requested by the commenters, to reduce the burden and cost of the rule and to 

provide greater flexibility to broker-dealers to tailor their systems and processes, and generally to 

choose how, to comply with the rule.  The modifications to the rule made in response to the 

comments received have been discussed in detail in Part III.C. 

B. Amendment to Advisers Act Rule 204-2 

The Commission has prepared the following Final Regulatory Flexibility Analysis 

(“FRFA”) in accordance with section 4(a) of the RFA relating to the final amendments to Rule 

204-2 under the Advisers Act.  

1. Need for the Rule Amendment 

                                                 
764  For example, because broker-dealers do not always know the identity of their counterparty 

when they enter a transaction, providing broker-dealers that are small entities with an exemption 

from the standard settlement cycle would likely create substantial confusion over when a 

transaction will settle. 

765  For example, for firm commitment offerings, the Commission modified the proposed rule 

at adoption to incorporate a T+2 rather than a T+1 standard, as discussed above in Part II.C.4.  

More generally, small entities retain the option under paragraph (d) to agree with their 

counterparty in advance of a transaction subject to Rule 15c6-1(a) to use a settlement cycle other 

than T+1.  See supra Part II.C.5. 



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As discussed above, we are adopting amendments to 17 CFR 275.206(4)-2 (“Rule 206(4)-

2”) to require all registered investment advisers to make and keep certain records for any 

transaction that is subject to the requirements of Rule 15c6-2(a). Those records include each 

confirmation received, and any allocation and each affirmation sent or received, with a date and 

time stamp for each allocation and affirmation that indicates when the allocation and affirmation 

was sent or received.  The reasons for, and objectives of, the final amendments are discussed in 

more detail in Parts I and IV above. The burdens of these requirements on small advisers are 

discussed in Parts VIII and IX, which discuss the burdens on all advisers. The professional skills 

required to meet these specific burdens are also discussed in Part IX. 

2. Summary of Significant Issues Raised by Public Comment 

In developing our approach to Rule 204-2, we considered the potential impact on small 

entities that would be subject to the final amendments.  In the 2022 Proposing Release, we 

requested comment on the matters discussed in the IRFA, including the proposed amendments to 

Rule 204-2, as well as the potential impacts discussed in this analysis, and whether the proposal 

could have an effect on small entities that has not been considered.  One commenter, concerned 

that the Commission had underestimated the time and cost burdens for implementing the proposed 

recordkeeping requirements, observed that if investment advisers that currently rely on third 

parties to meet their recordkeeping obligations were no longer be able to do so, and would instead 

have to obtain and maintain such records on an ongoing basis, advisers, “especially smaller and 

mid-sized investment advisers,” would incur costs to update their infrastructure to obtain and 

maintain the proposed trading records.766  This commenter recommended that the Commission 

                                                 
766  IAA April Letter, supra note 16, at 7. 



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update its estimates, and specifically requested “that the Commission review the potential cost 

savings from allowing investment advisers to utilize third parties to maintain required records 

under the Proposal.”767  

As discussed above, advisers may continue to rely on third parties to comply with their 

recordkeeping obligations, consistent with current practice, and we do not believe that the final 

amendments to Rule 204-2 will require most advisers to make significant changes to their current 

recordkeeping practices.  We recognize that the amendments to final Rule 204-2 will require 

registered investment advisers to make and keep records of confirmations received, and any 

allocations and each affirmation sent or received for securities transactions that are subject to the 

requirements of Rule 15c6-2(a).  Some advisers—including small advisers—may need to update 

their processes to retain and date stamp the specified records.  After consideration of the comments 

received, we are revising our estimates to increase the number of small entities affected by the new 

rule and amendments, update the estimated wage rates, and increase the hourly burdens associated 

with the amendments to Rule 204-2. 

3. Description and Estimate of Small Entities 

The final amendments will affect certain investment advisers registered with the 

Commission, including some small entities. Under Commission rules, for the purposes of the 

Advisers Act and the RFA, an investment adviser generally is a small entity if it: (1) has assets 

under management having a total value of less than $25 million; (2) did not have total assets of $5 

million or more on the last day of the most recent fiscal year; and (3) does not control, is not 

controlled by, and is not under common control with another investment adviser that has assets 

                                                 
767  Id. 



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under management of $25 million or more, or any person (other than a natural person) that had 

total assets of $5 million or more on the last day of its most recent fiscal year.768   

As discussed in Part IX.A, the Commission estimates that as of June 2022, 12,991 

registered investment advisers will be subject to the final amendments to Rule 204-2 under the 

Advisers Act.  Based on IARD data, we estimate that, as of June 2022, approximately 522 SEC-

registered advisers are small entities (“small advisers”).769  Of these, the Commission anticipates 

that 33, or 6% of small advisers registered with the Commission, would be subject to the final 

amendment under the Advisers Act.770  

4. Projected Reporting, Recordkeeping, and Other Compliance Requirements 

The final amendments to Rule 204-2 will require all registered investment advisers to 

maintain make and keep certain records with respect to any securities transaction that is subject to 

                                                 
768  Advisers Act Rule 0-7(a). 

769  Based on SEC-registered investment adviser responses to Items 5.F. and 12 of Form ADV 

as of June 2022, incorporating Form ADV filings received through IARD through August 31, 

2022. Only SEC-registered investment advisers with regulatory assets under management 

(“RAUM”) of less than $25 million, as indicated in Form ADV Item 5.F.(2)(c) are required to 

respond to Form ADV Item 12. For purposes of this analysis, a registered investment adviser is 

classified as a “small business” or “small organization” if they respond “No” to Form ADV Item 

12.A., 12.B.(1), 12.B.(2), 12.C.(1), and 12.C.(2). These responses indicate that the registered 

investment adviser had RAUM of less than $25 million, did not have total assets of $5 million or 

more on the last day of the most recent fiscal year; and does not control, is not controlled by, and is 

not under common control with another investment adviser that has RAUM of $25 million or 

more, or any person (other than a natural person) that had total assets of $5 million or more on the 

last day of the most recent fiscal year, consistent with the definition of a small entity under the 

Advisers Act for purposes of the RFA. 

770  Based on data from Form ADV as of June 2022. This figure represents small registered 

investment advisers that: (i) report clients that are only individuals or high net worth individuals in 

response to Item 5.D, and (ii) do not report participating in wrap fee programs in response to Item 

5.I, and (iii) have regulatory assets under management greater than zero in response to Item 5.D. 



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the requirements of Rule 15c6-2(a). These records include each confirmation received, and any 

allocation and each affirmation sent or received, with a date and time stamp for each allocation and 

affirmation that indicates when the allocation and affirmation were sent or received.  Each of these 

records will be required to be kept in the same manner, and for the same period of time, as other 

books and records required to be kept under Rule 204-2(a).771  The PRA for Rule 204-2 discusses 

the type of professional skills necessary to conduct such activities.  The Commission believes that 

no Federal rules duplicate, overlap or conflict with the final amendments to Rule 204-2.  As 

discussed above, there are approximately 33 small advisers currently registered with us that we 

believe will impacted by the rule. As discussed in our Paperwork Reduction Act Analysis, the 

amendments to Rule 204-2 under the Advisers Act will increase the annual burden by 

approximately three hours per adviser, or 99 incremental aggregate hours for small advisers. We 

therefore believe the annual monetized aggregate cost to small advisers associated with our 

amendments will be 7,673.772 

5. Description of Commission Actions to Minimize Effect on Small Entities 

The RFA directs the Commission to consider significant alternatives that would accomplish 

our stated objective, while minimizing any significant economic impact on small entities. The 

Commission considered alternatives to the final amendments to Rule 204-2 that would accomplish 

the stated objectives without disproportionately burdening investment advisers that are small 

entities, including: (1) differing compliance or reporting requirements or timetables that take into 

account the resources available to small entities; (2) clarifying, consolidating or simplifying the 

compliance and reporting requirements; (3) using performance rather than design standards; or (4) 

                                                 
771  See, e.g., Advisers Act Rule 204-2(e)–(g). 

772  Calculated as follows: (3 hours x 33 small advisers) x $77.5 per burden hour = $7,673. 



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providing an exemption from coverage of all or part of the final rule amendments for investment 

advisers that are small entities.  

Regarding the first and fourth alternatives, the Commission believes that establishing 

different compliance, recordkeeping, or reporting requirements or timetables for small advisers, or 

exempting small advisers from the amended rule, or any part thereof, would be inappropriate under 

these circumstances. The protections of the Advisers Act are intended to apply equally to clients of 

both large and small firms and small entities currently follow the same requirements that large 

entities do when making and keeping books and records; therefore, it would be inconsistent with 

the purposes of the Advisers Act to specify differences for small entities under the final 

amendments to Rule 204-2. While the Commission estimates that 33 small advisers will incur 

costs to comply with the amendments, the Commission believes that the initial burden on small 

advisers of retaining the required records will not be large. As discussed above, the Commission 

believes that many advisers, including small advisers, already have processes in place to retain 

records of confirmations received, and allocations and affirmations sent and received as part of 

their customary and usual business practices, though some advisers do not currently retain these 

records and some still maintain certain records in paper and/or communicate by telephone. The 

Commission also believes many such records are electronically maintained, and are sent or 

received electronically, in which case such documents are already date and time stamped in many 

instances. As a result, the Commission does not believe the two hour additional burden of 

complying with the final amendments would warrant establishing a different timetable for 

compliance for small advisers. In addition, as discussed above, our staff would use the information 

that advisers would maintain to help prepare for examinations of investment advisers and verify 

that an adviser has completed the steps necessary to complete settlement in a timely manner in 



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accordance with final Rule 15c6-1(a). Establishing different conditions for large and small advisers 

would negate these benefits.  

Similarly, we do not believe it would be appropriate to exempt small advisers from the 

final amendments. We believe that 33 small advisers will be subject to amended Rule 204-2 and 

thus make and keep records of each confirmation received, and any allocation and each affirmation 

sent or received, with a date and time stamp for each allocation and affirmation that indicates when 

the allocation and affirmation were sent or received.  This approach is designed to support the 

Commission’s policy objectives in achieving same-day affirmation by helping to ensure that trades 

with advisers timely settle on T+1.  In addition, this requirement will help advisers research and 

remediate issues that may cause delays in the issuance of allocations and affirmations and improve 

their timeliness overall.  Requiring these records also will help advisers establish that they have 

timely met contractual obligations, if applicable, or any requirements broker-dealers impose in 

light of their compliance obligations under final Rule 15c6-2(a).   

Regarding the second alternative, the Commission believes the final amendments are clear 

and that further clarification, consolidation, or simplification of the compliance requirements is not 

necessary. Amended Rule 204-2 states the types of communications – confirmations, any 

allocations, and affirmations – that advisers must retain in their records, and that each allocation 

and affirmation must be date and time stamped. We believe that by clearly listing these types of 

communications as required records, advisers will not need to parse whether, and if so which, 

current requirement under Rule 204-2 captures these post-trade communications. Further, the 

requirement to date and time stamp each allocation and affirmation sent to a broker or dealer is 

clear and consistent with many advisers’ current practices of date and time stamping these records.  



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Regarding the third alternative, the final amendments to Rule 204-2 use a combination of 

performance and design standards. The final Rule 204-2 amendments are narrowly tailored to 

correspond to the final rules and rule amendments under the Exchange Act.  Although the 

amendments provide some flexibility to advisers in such practices as date- and time-stamping, we 

generally find that it is more useful to our regulatory and examination program, and therefore for 

our ability to protect investors, for advisers to retain books and records in a uniform and 

quantifiable manner.  

C. Exchange Act Rule 17Ad-27 

Exchange Act Rule 17Ad-27 applies to clearing agencies that are CMSPs.  For the 

purposes of Commission rulemaking, a small entity includes, when used with reference to a 

clearing agency, a clearing agency that (i) compared, cleared, and settled less than $500 million in 

securities transactions during the preceding fiscal year, (ii) had less than $200 million of funds and 

securities in its custody or control at all times during the preceding fiscal year (or at any time that it 

has been in business, if shorter), and (iii) is not affiliated with any person (other than a natural 

person) that is not a small business or small organization.773 

As discussed in the T+1 Proposing Release, and based on the Commission’s existing 

information about the CMSPs that would be subject to Rule 17Ad-27, the Commission continues 

to believe that all such CMSPs would not fall within the definition of a small entity described 

above.774  While other CMSPs may emerge and seek to register as clearing agencies or obtain 

                                                 
773  See 17 CFR 240.0-10(d). 

774  DTCC ITP Matching is a subsidiary of DTCC, and in 2020, DTCC processed $2.329 

quadrillion in financial transactions.  DTCC, 2020 Annual Report.  As of December 1, 2021, 

SS&C Technologies Holdings, Inc. (NASDAQ: SSNC) had a market capitalization of $19.35 

billion.  Bloomberg STP LLC is a wholly-owned by Bloomberg L.P., a global business and 

financial information and news company.Conformed to Federal Register version 

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exemptions from registration as a clearing agency with the Commission, the Commission does not 

believe that any such entities would be “small entities” as defined in 17 CFR 240.0-10(d).  

Accordingly, the Commission believes that any such CMSP would exceed the thresholds for 

“small entities” set forth in in 17 CFR 240.0-10.   

The Commission received no comments regarding its analysis for Rule 17Ad-27 in the T+1 

Proposing Release.  For the reasons described above, the Commission certifies that Rule 17Ad-27 

will not have a significant economic impact on a substantial number of small entities. 

XI. Other Matters 

If any of the provisions of these rules, or the application thereof to any person or 

circumstance, is held to be invalid, such invalidity shall not affect other provisions or application 

of such provisions to other persons or circumstances that can be given effect without the invalid 

provision or application.  

Pursuant to the Congressional Review Act,775 the Office of Information and Regulatory 

Affairs has designated these rules as a “major rule,” as defined by 5 U.S.C. 804(2). 

Statutory Authority 

The Commission is adopting amendments to Regulation S-T and Rule 15c6-1 and adopting 

new Rules 15c6-2 and 17Ad-27 under the Commission’s rulemaking authority set forth in sections 

15(c)(6), 17A, 23(a), and 35A of the Exchange Act [15 U.S.C. 78o(c)(6), 78q-1, 78w(a), and 78ll, 

respectively].  The Commission is adopting amendments to Rule 204-2 under the Advisers Act 

under the authority set forth in sections 204 and 211 of the Advisers Act [15 U.S.C. 80b-

4 and 80b-11]. 

List of Subjects in 17 CFR Parts 232, 240, and 275 

                                                 
775  5 U.S.C. 801 et seq. 



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Reporting and recordkeeping requirements, Securities. 

Text of Amendment 

In accordance with the foregoing, title 17, chapter II of the Code of Federal Regulations is 

amended as follows: 

PART 232— REGULATION S-T—GENERAL RULES AND REGULATIONS FOR 

ELECTRONIC FILINGS 

1. The general authority citation for part 232 continues to read as follows:  

Authority: 15 U.S.C. 77c, 77f, 77g, 77h, 77j, 77s(a), 77z-3, 77sss(a), 78c(b), 78l, 78m, 

78n, 78o(d), 78w(a), 78ll, 80a-6(c), 80a-8, 80a-29, 80a-30, 80a-37, 80b-4, 80b-6a, 80b-10, 80b-11, 

7201 et seq.; and 18 U.S.C. 1350, unless otherwise noted. 

*  *   *   *  * 

2.  Amend § 232.101 by: 

a. Removing the word “and” at the end of paragraph (a)(1)(xxix); 

b. Removing the period at the end of paragraph (a)(1)(xxx) and adding “; and” in its 

place; and  

c. Adding paragraph (a)(1)(xxxi).  

The addition reads as follows: 

§ 232.101 Mandated electronic submissions and exceptions. 

(a) * * * 

(1) * * * 

(xxxi) Reports filed pursuant to § 240.17Ad-27 of this chapter (Rule 17Ad-27 under the 

Exchange Act).  

*  *   *   *  * 



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3. Amend §232.405 by: 

a. Revising the introductory text and paragraphs (a)(2), (a)(3)(i) introductory text, (a)(3)(ii), 

and (a)(4), and (b)(1) introductory text; 

b. Adding paragraph (b)(5); and 

c. Revising Note 1 to § 232.405. 

The addition and revisions read as follows: 

§232.405 Interactive Data File submissions. 

This section applies to electronic filers that submit Interactive Data Files. Section 

229.601(b)(101) of this chapter (Item 601(b)(101) of Regulation S-K), General Instruction F of 

Form 11-K (§ 249.311), paragraph (101) of Part II—Information Not Required to be Delivered to 

Offerees or Purchasers of Form F-10 (§ 239.40 of this chapter), paragraph 101 of the Instructions 

as to Exhibits of Form 20-F (§ 249.220f of this chapter), paragraph B.(15) of the General 

Instructions to Form 40-F (§ 249.240f of this chapter), paragraph C.(6) of the General Instructions 

to Form 6-K (§ 249.306 of this chapter), § 240.17Ad-27(d) of this chapter (Rule 17Ad-27(d) under 

the Exchange Act), Note D.5 of § 240.14a-101 of this chapter (Rule 14a-101 under the Exchange 

Act), Item 1 of § 240.14c-101 of this chapter (Rule 14c-101 under the Exchange Act), General 

Instruction C.3.(g) of Form N-1A (§§ 239.15A and 274.11A of this chapter), General Instruction I 

of Form N-2 (§§ 239.14 and 274.11a-1 of this chapter), General Instruction C.3.(h) of Form N-3 

(§§ 239.17a and 274.11b of this chapter), General Instruction C.3.(h) of Form N-4 (§§ 239.17b and 

274.11c of this chapter), General Instruction C.3.(h) of Form N-6 (§§ 239.17c and 274.11d of this 

chapter), and General Instruction C.4 of Form N-CSR (§§ 249.331 and 274.128 of this chapter) 

specify when electronic filers are required or permitted to submit an Interactive Data File 

(§ 232.11), as further described in note 1 to this section. This section imposes content, format and 



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submission requirements for an Interactive Data File, but does not change the substantive content 

requirements for the financial and other disclosures in the Related Official Filing (§ 232.11). 

(a) * * * 

(2) Be submitted only by an electronic filer either required or permitted to submit an 

Interactive Data File as specified by Item 601(b)(101) of Regulation S-K, General Instruction F of 

Form 11-K (§ 249.311), paragraph (101) of Part II—Information Not Required to be Delivered to 

Offerees or Purchasers of Form F-10 (§ 239.40 of this chapter), paragraph 101 of the Instructions 

as to Exhibits of Form 20-F (§ 249.220f of this chapter), paragraph B.(15) of the General 

Instructions to Form 40-F (§ 249.240f of this chapter), paragraph C.(6) of the General Instructions 

to Form 6-K (§ 249.306 of this chapter), Rule 17Ad-27(d) under the Exchange Act, Note D.5 of 

Rule 14a-101 under the Exchange Act, Item 1 of Rule 14c-101 under the Exchange Act, General 

Instruction C.3.(g) of Form N1A (§§ 239.15A and 274.11A of this chapter), General Instruction I 

of Form N-2 (§§ 239.14 and 274.11a-1 of this chapter), General Instruction C.3.(h) of Form N-3 

(§§ 239.17a and 274.11b of this chapter), General Instruction C.3.(h) of Form N-4 (§§ 239.17b and 

274.11c of this chapter), General Instruction C.3.(h) of Form N-6 (§§ 239.17c and 274.11d of this 

chapter), or General Instruction C.4 of Form N-CSR (§§ 249.331 and 274.128 of this chapter), as 

applicable; 

(3) * * * 

(i) If the electronic filer is not a management investment company registered under the 

Investment Company Act of 1940 (15 U.S.C. 80a et seq.), or a separate account as defined in 

section 2(a)(14) of the Securities Act (15 U.S.C. 77b(a)(14)) registered under the Investment 

Company Act of 1940, or a business development company as defined in section 2(a)(48) of the 

Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(48)), or a clearing agency that provides a 



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central matching service, and is not within one of the categories specified in paragraph (f)(1)(i) of 

this section, as partly embedded into a filing with the remainder simultaneously submitted as an 

exhibit to:  

* * * 

(ii) If the electronic filer is a management investment company registered under the 

Investment Company Act of 1940 (15 U.S.C. 80a et seq.), or a separate account (as defined in 

section 2(a)(14) of the Securities Act (15 U.S.C. 77b(a)(14)) registered under the Investment 

Company Act of 1940, or a business development company as defined in section 2(a)(48) of the 

Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(48)), or a clearing agency that provides a 

central matching service, and is not within one of the categories specified in paragraph (f)(1)(ii) of 

this section, as partly embedded into a filing with the remainder simultaneously submitted as an 

exhibit to a filing that contains the disclosure this section requires to be tagged; and 

(4) Be submitted in accordance with the EDGAR Filer Manual and, as applicable, Item 

601(b)(101) of Regulation S-K, General Instruction F of Form 11-K (§ 249.311 of this chapter), 

paragraph (101) of Part II—Information Not Required to be Delivered to Offerees or Purchasers of 

Form F-10 (§ 239.40 of this chapter), paragraph 101 of the Instructions as to Exhibits of Form 20-F 

(§ 249.220f of this chapter), paragraph B.(15) of the General Instructions to Form 40-F (§ 249.240f 

of this chapter), paragraph C.(6) of the General Instructions to Form 6-K (§ 249.306 of this 

chapter), Rule 17Ad-27(d) under the Exchange Act, Note D.5 of Rule 14a-101 under the Exchange 

Act, Item 1 of Rule 14c-101 under the Exchange Act, General Instruction C.3.(g) of Form N-1A 

(§§ 239.15A and 274.11A of this chapter), General Instruction I of Form N-2 (§§ 239.14 and 

274.11a-1 of this chapter), General Instruction C.3.(h) of Form N-3 (§§ 239.17a and 274.11b of 

this chapter), General Instruction C.3.(h) of Form N-4 (§§ 239.17b and 274.11c of this chapter), 



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General Instruction C.3.(h) of Form N-6 (§§ 239.17c and 274.11d of this chapter); or General 

Instruction C.4 of Form N-CSR (§§ 249.331 and 274.128 of this chapter). 

(b) * * * 

(1) If the electronic filer is not a management investment company registered under the 

Investment Company Act of 1940 (15 U.S.C. 80a et seq.), or a separate account (as defined in 

section 2(a)(14) of the Securities Act (15 U.S.C. 77b(a)(14)) registered under the Investment 

Company Act of 1940, or a business development company as defined in section 2(a)(48) of the 

Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(48)), or a clearing agency that provides a 

central matching service, an Interactive Data File must consist of only a complete set of 

information for all periods required to be presented in the corresponding data in the Related 

Official Filing, no more and no less, from all of the following categories: 

 * * * * * 

(5) If the electronic filer is a clearing agency that provides a central matching service, an 

Interactive Data File must consist only of a complete set of information for all corresponding data 

in the Related Official Filing, no more and no less, as follows: 

(i) The information provided pursuant to (Rule 17Ad-27 under the Exchange Act). 

(ii) [Reserved] 

* * * * * 

Note 1 to § 232.405: Item 601(b)(101) of Regulation S-K specifies the circumstances under 

which an Interactive Data File must be submitted and the circumstances under which it is 

permitted to be submitted, with respect to §§ 239.11 (Form S-1), 239.13 (Form S-3), 239.25 (Form 

S-4), 239.18 (Form S-11), 239.31 (Form F-1), 239.33 (Form F-3), 239.34 (Form F-4), 249.310 

(Form 10-K), 249.308a (Form 10-Q), and 249.308 of this chapter (Form 8-K). General Instruction 



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F of Form 11-K (§ 249.311 of this chapter) specifies the circumstances under which an Interactive 

Data File must be submitted, and the circumstances under which it is permitted to be submitted, 

with respect to Form 11-K. Paragraph (101) of Part II—Information not Required to be Delivered 

to Offerees or Purchasers of Form F-10 (§ 239.40 of this chapter) specifies the circumstances 

under which an Interactive Data File must be submitted and the circumstances under which it is 

permitted to be submitted, with respect to Form F-10. Paragraph 101 of the Instructions as to 

Exhibits of Form 20-F (§ 249.220f of this chapter) specifies the circumstances under which an 

Interactive Data File must be submitted and the circumstances under which it is permitted to be 

submitted, with respect to Form 20-F. Paragraph B.(15) of the General Instructions to Form 40-F 

(§ 249.240f of this chapter) and Paragraph C.(6) of the General Instructions to Form 6-K 

(§ 249.306 of this chapter) specify the circumstances under which an Interactive Data File must be 

submitted and the circumstances under which it is permitted to be submitted, with respect to 

§§ 249.240f (Form 40-F) and 249.306 of this chapter (Form 6-K). Rule 17Ad-27(d) under the 

Exchange Act specifies the circumstances under which an Interactive Data File must be submitted 

with respect the reports required under Rule 17Ad-27. Note D.5 of Schedule 14A (§ 240.14a-101 

of this chapter) and Item 1 of Schedule 14C (§ 240.14c-101 of this chapter) specify the 

circumstances under which an Interactive Data File must be submitted with respect to Schedules 

14A and 14C. Item 601(b)(101) of Regulation S-K, paragraph (101) of Part II—Information not 

Required to be Delivered to Offerees or Purchasers of Form F-10, Instructions to Form 40-F, and 

paragraph C.(6) of the General Instructions to Form 6-K all prohibit submission of an Interactive 

Data File by an issuer that prepares its financial statements in accordance with 17 CFR 210.6-01 

through 210.6-10 (Article 6 of Regulation S-X). For an issuer that is a management investment 

company or separate account registered under the Investment Company Act of 1940 (15 U.S.C. 



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80a et seq.) or a business development company as defined in section 2(a)(48) of the Investment 

Company Act of 1940 (15 U.S.C. 80a2(a)(48)), General Instruction C.3.(g) of Form N-1A 

(§§ 239.15A and 274.11A of this chapter), General Instruction I of Form N-2 (§§ 239.14 and 

274.11a-1 of this chapter), General Instruction C.3.(h) of Form N-3 (§§ 239.17a and 274.11b of 

this chapter), General Instruction C.3.(h) of Form N-4 (§§ 239.17b and 274.11c of this chapter), 

General Instruction C.3.(h) of Form N-6 (§§ 239.17c and 274.11d of this chapter), and General 

Instruction C.4 of Form N-CSR (§§ 249.331 and 274.128 of this chapter), as applicable, specifies 

the circumstances under which an Interactive Data File must be submitted. 

 

PART 240—GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT 

OF 1934 

4.   The general authority citation for part 240 continues to read as follows: 

Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 77eee, 77ggg, 77nnn, 77sss, 

77ttt, 78c, 78c-3, 78c-5,78d, 78e, 78f, 78g, 78i, 78j, 78j-1, 78j-4, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 

78o, 78o-4, 78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 78dd, 78ll, 78mm, 80a-20, 80a-23, 

80a-29, 80a-37, 80b-3, 80b-4, 80b-11, 7201 et seq., and 8302; 7 U.S.C. 2(c)(2)(E); 12 

U.S.C.5221(e)(3); 18 U.S.C. 1350; and Pub. L. 111-203, 939A, 124 Stat.1376 (2010); and Pub. L. 

112-106, sec. 503 and 602, 126 Stat. 326 (2012), unless otherwise noted.  

*  *  *  *  * 

5.  Revise § 240.15c6-1 to read as follows:  

§ 240.15c6-1 Settlement cycle. 

(a) Except as provided in paragraphs (b), (c), and (d) of this section, a broker or dealer shall 

not effect or enter into a contract for the purchase or sale of a security (other than an exempted 



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security, a government security, a municipal security, commercial paper, bankers' acceptances, or 

commercial bills) 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. 

(b) Paragraph (a) of this section shall not apply to:  

(1) Contracts for the purchase or sale of limited partnership interests that are not listed on 

an exchange or for which quotations are not disseminated through an automated quotation system 

of a registered securities association;  

(2) Security-based swaps; or 

(3) Contracts for the purchase or sale of securities that the Commission may from time to 

time, taking into account then existing market practices, exempt by order from the requirements of 

paragraph (a) of this section, either unconditionally or on specified terms and conditions, if the 

Commission determines that such exemption is consistent with the public interest and the 

protection of investors. 

(c) Paragraph (a) of this section shall not apply to contracts for the sale for cash of 

securities that are priced after 4:30 p.m. Eastern Time (ET) on the date such securities are priced 

and that are sold by an issuer to an underwriter pursuant to a firm commitment underwritten 

offering registered under the Securities Act of 1933 or sold to an initial purchaser by a broker-

dealer participating in such offering provided that a broker or dealer shall not effect or enter into a 

contract for the purchase or sale of such securities that provides for payment of funds and delivery 

of securities later than the second business day after the date of the contract unless otherwise 

expressly agreed to by the parties at the time of the transaction. 



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(d) For purposes of paragraphs (a) and (c) of this section, the parties to a contract shall be 

deemed to have expressly agreed to an alternate date for payment of funds and delivery of 

securities at the time of the transaction for a contract for the sale for cash of securities pursuant to a 

firm commitment offering if the managing underwriter and the issuer have agreed to such date for 

all securities sold pursuant to such offering and the parties to the contract have not expressly 

agreed to another date for payment of funds and delivery of securities at the time of the 

transaction. 

6. Add § 240.15c6-2 to read as follows: 

§ 240.15c6-2 Same-day allocation, confirmation, and affirmation. 

(a) Any broker or dealer engaging in the allocation, confirmation, or affirmation process 

with another party or parties to achieve settlement of a securities transaction that is subject to the 

requirements of § 240.15c6-1(a) shall: 

(1) Enter into a written agreement with the relevant parties to ensure completion of the 

allocation, confirmation, affirmation, or any combination thereof, for the transaction as soon as 

technologically practicable and no later than the end of the day on trade date in such form as 

necessary to achieve settlement of the transaction; or 

(2) Establish, maintain, and enforce written policies and procedures reasonably designed to 

ensure completion of the allocation, confirmation, affirmation, or any combination thereof, for the 

transaction as soon as technologically practicable and no later than the end of the day on trade date 

in such form as necessary to achieve settlement of the transaction. 

(b) To ensure completion of the allocation, confirmation, affirmation, or any combination 

thereof for the transaction as soon as technologically practicable and no later than the end of the 



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day on trade date, the reasonably designed written policies and procedures required by paragraph 

(a)(2) of this section shall: 

(1) Identify and describe any technology systems, operations, and processes that the broker 

or dealer uses to coordinate with other relevant parties, including investment advisers and 

custodians, to ensure completion of the allocation, confirmation, or affirmation process for the 

transaction; 

(2) Set target time frames on trade date for completing the allocation, confirmation, and 

affirmation for the transaction; 

(3) Describe the procedures that the broker or dealer will follow to ensure the prompt 

communication of trade information, investigate any discrepancies in trade information, and adjust 

trade information to help ensure that the allocation, confirmation, and affirmation can be 

completed by the target time frames on trade date; 

(4) Describe how the broker or dealer plans to identify and address delays if another party, 

including an investment adviser or a custodian, is not promptly completing the allocation or 

affirmation for the transaction, or if the broker or dealer experiences delays in promptly 

completing the confirmation; and 

(5) Measure, monitor, and document the rates of allocations, confirmations, and 

affirmations completed as soon as technologically practicable and no later than the end of the day 

on trade date. 

7.  Add § 240.17Ad-27 to read as follows:  

§ 240.17Ad-27 Straight-through processing by clearing agencies that provide a central 

matching service. 



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(a) A clearing agency that provides a central matching service must establish, implement, 

maintain, and enforce written policies and procedures reasonably designed to facilitate straight-

through processing of securities transactions at the clearing agency.   

(b) A clearing agency that provides a central matching service must submit to the 

Commission every twelve months a report that includes the following:  

(1) A summary of the clearing agency’s policies and procedures required under paragraph 

(a) of this section, current as of the last day of the twelve-month period covered by the report 

required under paragraph (b) of this section;  

(2) A qualitative description of the clearing agency’s progress in facilitating straight-

through processing during the twelve-month period covered by the report required under paragraph 

(b) of this section;  

(3) A quantitative presentation of data that includes:  

(i) The total number of trades submitted to the clearing agency for processing; 

(ii) The total number of allocations submitted to the clearing agency; 

(iii) The total number of confirmations submitted to the clearing agency, as well as the total 

number of confirmations cancelled by a user; 

(iv) The percentage of confirmations submitted to the clearing agency that are affirmed on 

trade date, specifying to the extent practicable the relevant timeframe in which the affirmation is 

processed on trade date; 

(v) The percentage of allocations and confirmations submitted to the clearing agency that 

are matched and automatically confirmed through the clearing agency’s services; and 



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(vi) Metrics concerning the use of manual and automated processes by the clearing 

agency’s users with respect to its services that may be used to assess progress in facilitating 

straight-through processing.  

(4) Each of the data sets required under paragraph (b)(3) of this section shall be: 

(i) Organized on a month-by-month basis, beginning with January of each year, for the 

twelve months covered by the report required under paragraph (b) of this section; 

(ii) Separated, where applicable, between the use of central matching and electronic trade 

confirmation services offered by the clearing agency;  

(iii) Separated, as appropriate, by asset class;  

(iv) Separated by type of user; and 

(v) Presented on an anonymized and aggregated basis. 

(5) A qualitative description of the actions the clearing agency intends to take to further 

facilitate straight-through processing of securities transactions at the clearing agency during the 

twelve-month period that follows the period covered by the report required under paragraph (b) of 

this section. 

(c) Each report required under paragraph (b) of this section must be filed within 60 days of 

the end of the twelve-month period covered by the report required under paragraph (b) of this 

section, and the twelve-month period covered by each report shall commence on January 1 of the 

calendar year. 

(d) The report required under paragraph (b) of this section must be filed electronically on 

EDGAR and must be provided in an Interactive Data File in accordance with § 232.405 of this 

chapter (Rule 405 of Regulation S-T) and the EDGAR Filer Manual. 

PART 275—RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940 



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8.   The authority citation for part 275 continues to read, in part, as follows: 

Authority: 15 U.S.C. 80b-2(a)(11)(G), 80b-2(a)(11)(H), 80b-2(a)(17), 80b-3, 80b-4, 80b-

4a, 80b-6(4), 80b-6a, and 80b-11, unless otherwise noted.  

*  *  *  *  * 

Section 275.204-2 is also issued under 15 U.S.C. 80b-6.  

*  *  *  *  * 

9. Amend § 275.204-2 by revising paragraph (a)(7)(iii) to read as follows:  

§ 275.204-2 Books and records to be maintained by investment advisers. 

(a) *  *  * 

(7) *  *  * 

(iii) The placing or execution of any order to purchase or sell any security; and, for any 

transaction that is subject to the requirements of § 240.15c6-2(a) of this chapter, each confirmation 

received, and any allocation and each affirmation sent or received, with a date and time stamp for 

each allocation and affirmation that indicates when the allocation and affirmation was sent or 

received; 

*  *  *  *  * 

By the Commission. 

Date: February 15, 2023. 

 

Vanessa A. Countryman,  

Secretary.

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SECURITIES AND EXCHANGE COMMISSION 

17 CFR Parts 232, 240, and 275 

[Release Nos. 34-96930, IA-6239; File No. S7-05-22] 

RIN 3235-AN02 

Shortening the Securities Transaction Settlement Cycle 

AGENCY:  Securities and Exchange Commission. 

ACTION:  Final rule. 

SUMMARY:  The Securities and Exchange Commission (“Commission”) is adopting rule 

amendments to shorten the standard settlement cycle for most broker-dealer transactions from two 

business days after the trade date (“T+2”) to one business day after the trade date (“T+1”).  In 

addition, the Commission is adopting new rules related to the processing of institutional trades by 

broker-dealers and certain clearing agencies.  The Commission is also amending certain 

recordkeeping requirements applicable to registered investment advisers.   

DATES:  Effective date: May 5, 2023. 

Compliance date:  The applicable compliance dates are discussed in Part VII of this release. 

FOR FURTHER INFORMATION CONTACT:  Matthew Lee, Assistant Director, Susan 

Petersen, Special Counsel, Andrew Shanbrom, Special Counsel, Jesse Capelle, Special Counsel, 

and Mary Ann Callahan, Senior Policy Advisor, at (202) 551-5710, Office of Clearance and 

Settlement, Division of Trading and Markets; Jennifer Porter, Senior Special Counsel, Amy Miller, 

Senior Counsel, and Holly H. Miller, Senior Financial Analyst, at (202) 551-6787, Division of 

Investment Management; U.S. Securities and Exchange Commission, 100 F Street NE, 

Washington, DC 20549-7010. 



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SUPPLEMENTARY INFORMATION:  First, the Commission is amending paragraph (a) of 17 

CFR 240.15c6-1 (“Rule 15c6-1”) under the Securities Exchange Act of 1934 (“Exchange Act”) to 

shorten the standard settlement cycle for most broker-dealer transactions from T+2 to T+1, as 

discussed in Part II.C.1.1  The Commission is also amending paragraph (b) of Rule 15c6-1 to 

exclude security-based swaps from the requirements under paragraph (a) of the rule, and amending 

paragraph (c) of Rule 15c6-1 to shorten the standard settlement cycle for firm commitment 

offerings priced after 4:30 p.m. Eastern Time (“ET”) from four business days after the trade date 

(“T+4”) to T+2, as discussed in Parts II.C.3 and II.C.4 respectively.   

Second, to promote the completion of allocations, confirmations, and affirmations by the 

end of trade date for transactions between broker-dealers and their institutional customers, the 

Commission is adopting a new rule under the Exchange Act at 17 CFR 240.15c6-2 (“Rule 15c6-

2”).  Rule 15c6-2 requires a broker-dealer to either enter into written agreements as specified in the 

rule or establish, maintain, and enforce written policies and procedures reasonably designed to 

address certain objectives related to completing allocations, confirmations, and affirmations as 

soon as technologically practicable and no later than the end of trade date.  The specific 

requirements of the rule are discussed in Part III.C.   

Third, the Commission is amending 17 CFR 275.204-2 (“Rule 204-2”) under the 

Investment Advisers Act of 1940 (“Advisers Act”) to require registered investment advisers to 

make and keep records of the allocations, confirmations, and affirmations for securities 

transactions subject to the requirements of Rule 15c6-2(a), as discussed in Part IV.C.   

                                                 
1  See Part II.A (discussing the types of securities transactions that are currently covered by 

Rule 15c6-1(a)) and Part II.C.1 (discussing the types of securities transactions that will be covered 

by the rule following the rule changes being adopted in this release). 



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Fourth, the Commission is adopting a new rule under the Exchange Act at 17 CFR 

240.17Ad-27 (“Rule 17Ad-27”) to require clearing agencies that provide a central matching 

service (“CMSPs”) to establish, implement, maintain, and enforce policies and procedures 

reasonably designed to facilitate straight-through processing (“STP”) and to file an annual report 

regarding progress with respect to STP.  The specific requirements of the rule are discussed in Part 

V.C. 

Fifth, the Commission is amending 17 CFR part 232 (“Regulation S-T”) to require that a 

CMSP submit the annual report required by Rule 17Ad-27 using the Commission’s Electronic 

Data Gathering, Analysis, and Retrieval system (“EDGAR”) and tag the information in the report 

using the structured (i.e., machine-readable) Inline eXtensible Business Reporting Language 

(“XBRL”).  The Commission discusses this requirement in Part V.C.4. 

Finally, the Commission solicited and received comments regarding the effect of 

shortening the settlement cycle on other Commission requirements, including 17 CFR 242.200 

(“Regulation SHO”), 17 CFR 240.10b-10 (“Rule 10b-10”), the financial responsibility rules 

applicable to broker-dealers, requirements related to prospectus delivery and “access versus 

delivery,” and the impact on self-regulatory organization (“SRO”) rules and operations.  These 

comments are discussed in Part VI. 

 

TABLE OF CONTENTS: 

I. Introduction ........................................................................................................................... 7 

II. Exchange Act Rule 15c6-1 – Standard Settlement Cycle ................................................ 10 

A. Proposed Amendments to Rule 15c6-1............................................................................. 10 

B. Comments ......................................................................................................................... 11 

1. Length of Standard Settlement Cycle and Exchange Act Rule 15c6-1(a) ....................... 11 

2. Securities Excluded from Requirements under Exchange Act Rule 15c6-1 ................... 26 



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3. Proposed Deletion of Rule 15c6-1(c) .............................................................................. 28 

4. Retention of Exchange Act Rule 15c6-1(d) ..................................................................... 30 

5. Exemptive Orders under Exchange Act Rule 15c6-1(b) ................................................. 31 

C. Final Rule and Discussion ................................................................................................ 36 

1. Amendment to Exchange Act Rule 15c6-1(a) ................................................................. 36 

2. Response to Comments Relating to T+0 Settlement ....................................................... 45 

3. Amendments to Exchange Act Rule 15c6-1(b) ............................................................... 47 

4. Amendment to Exchange Act Rule 15c6-1(c) ................................................................. 50 

5. Retention of Existing Exchange Act Rule 15c6-1(d) Unchanged ................................... 54 

6. Exemptive Orders under Exchange Act Rule 15c6-1(b) ................................................. 55 

III. Exchange Act Rule 15c6-2 – Same-Day Affirmation ....................................................... 60 

A. Proposed Rule 15c6-2 ....................................................................................................... 60 

B. Comments ......................................................................................................................... 62 

1. Existing Commercial Incentives for Timely Trade Allocations, Confirmations, and 

Affirmations ............................................................................................................................. 62 

2. Linking Settlement Instructions to Affirmation ............................................................... 63 

3. Definitions of Certain Terms ........................................................................................... 64 

4. Use of Third Parties to Achieve Same-Day Affirmation ................................................. 65 

5. Challenges Associated with Requiring Written Agreements in Support of Increasing 

Same-Day Affirmations ........................................................................................................... 66 

6. End-of-Day Trading, Transactions Across Multiple Time Zones, and Variations in Local 

Holidays as Obstacles to Same-Day Affirmation .................................................................... 70 

7. Alternative Rule Recommended in SIFMA August Letter .............................................. 71 

C. Final Rule and Discussion ................................................................................................ 75 

1. Modifications to Requirement for Written Agreements .................................................. 82 

2. New Policies and Procedures Alternative to Written Agreements Requirement ............ 88 

3. Elements of Reasonably Designed Policies and Procedures ........................................... 94 

4. Use of Defined Terms Other than “Customer” ................................................................ 99 

5. No Requirement to Link Settlement Instructions to Affirmations................................. 100 

IV. Advisers Act Rule 204-2 – Investment Adviser Recordkeeping ................................... 102 

A. Proposed Amendments to Rule 204-2 ............................................................................ 102 

B. Comments ....................................................................................................................... 103 



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C. Final Rule and Discussion .............................................................................................. 104 

V. Exchange Act Rule 17Ad-27 - Requirement for CMSPs to Facilitate Straight-Through 

Processing .................................................................................................................................. 109 

A. Proposed Rule 17Ad-27 .................................................................................................. 110 

B. Comment Letters from DTCC ITP ................................................................................. 112 

1. Amend Policies and Procedures Requirement to Add “Reasonably Designed” To the 

Current Text ........................................................................................................................... 115 

2. Use of ETCs and Manual Processes .............................................................................. 118 

3. Amend the Annual Reporting Requirement to Better Achieve Transparency .............. 121 

4. Support Further Standardization of Industry Protocols and Reference Data ................. 124 

C. Final Rule and Discussion .............................................................................................. 125 

1. New Rule 17Ad-27(a) – Requirement for Policies and Procedures .............................. 127 

2. New Rule 17Ad-27(b) - Annual Report......................................................................... 136 

3. New Rule 17Ad-27(c) – Timing of Filing Annual Report ............................................ 151 

4. New Rule 17Ad-27(d) - Filing Annual Report in EDGAR and Confidentiality Issues 152 

VI. Impact on Certain Commission Rules, Guidance, and SRO Rules .............................. 155 

A. Regulation SHO .............................................................................................................. 156 

B. Delivery of Rule 10b-10 Confirmations and Prospectuses ............................................. 160 

C. Other Prospectus Delivery Matters ................................................................................. 164 

D. Financial Responsibility Rules for Broker-Dealers ........................................................ 166 

E. Changes to SRO Rules and Operations .......................................................................... 169 

VII. Compliance Dates.............................................................................................................. 173 

A. Exchange Act Rule 15c6-1 ............................................................................................. 173 

B. Exchange Act Rule 15c6-1(b): Exclusion for Security-Based Swaps ............................ 181 

C. Exchange Act Rule 15c6-2 and Advisers Act Rule 204-2 .............................................. 181 

D. Exchange Act Rule 17Ad-27 .......................................................................................... 182 

VIII. Economic Analysis .................................................................................................... 183 

A. Background ..................................................................................................................... 184 

B. Baseline ........................................................................................................................... 192 

1. Central Counterparties ................................................................................................... 192 

2. Market Participants – Investors, Broker-Dealers, and Custodians ................................ 195 



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3. Investment Companies and Investment Advisers .......................................................... 201 

4. Current Market for Clearance and Settlement Services ................................................. 203 

C. Analysis of Benefits, Costs, and Impact on Efficiency, Competition, and Capital Formation

 209 

1. Benefits .......................................................................................................................... 209 

2. Costs ............................................................................................................................... 223 

3. Economic Implications through Other Commission Rules ........................................... 232 

4. Effect on Efficiency, Competition, and Capital Formation ........................................... 236 

5. Quantification of Direct and Indirect Effects of a T+1 Settlement Cycle ..................... 243 

D. Consideration of Reasonable Alternatives ...................................................................... 264 

1. Delete 15c6-1(c) to T+2 ................................................................................................. 264 

2. Adopt 17Ad-27 to Require Certain Outcomes............................................................... 265 

3. Adopt Rule Changes to Rule 15c6-2 as recommended by SIFMA’s August Comment 

Letter ...................................................................................................................................... 266 

4. Replace the Written Agreement Requirement in Proposed Rule 15c6-2 with a Principles-

Based Approach ..................................................................................................................... 268 

5. Select a Later Implementation Date for Adoption of the Rule ...................................... 269 

IX. Paperwork Reduction Act ................................................................................................ 270 

A. Advisers Act Rule 204-2 ................................................................................................. 271 

B. Exchange Act Rule 17Ad-27 .......................................................................................... 277 

C. Exchange Act Rule 15c6-2 ............................................................................................. 280 

1. Summary and Proposed Use of Information .................................................................. 280 

2. Respondents ................................................................................................................... 283 

3. Total Initial and Annual Reporting Burdens .................................................................. 284 

4. Collection of Information is Mandatory ........................................................................ 286 

5. Confidentiality ............................................................................................................... 286 

6. Retention Period............................................................................................................. 287 

X. Regulatory Flexibility Act ................................................................................................ 288 

A. Exchange Act Rules 15c6-1 and 15c6-2 ......................................................................... 288 

1. Need for the Rules ......................................................................................................... 288 

2. Summary of Significant Issues Raised by Public Comment ......................................... 289 

3. Description and Estimate of Small Entities ................................................................... 289 



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4. Projected Reporting, Recordkeeping, and Other Compliance Requirements ................ 290 

5. Description of Commission Actions to Minimize Effect on Small Entities .................. 292 

B. Amendment to Advisers Act Rule 204-2 ........................................................................ 293 

1. Need for the Rule Amendment ...................................................................................... 293 

2. Summary of Significant Issues Raised by Public Comment ......................................... 294 

3. Description and Estimate of Small Entities ................................................................... 295 

4. Projected Reporting, Recordkeeping, and Other Compliance Requirements ................ 296 

5. Description of Commission Actions to Minimize Effect on Small Entities .................. 297 

C. Exchange Act Rule 17Ad-27 .......................................................................................... 300 

XI. Other Matters .................................................................................................................... 301 

Statutory Authority .................................................................................................................. 301 

 

I. Introduction 

Promoting the timely, orderly, and efficient settlement of securities transactions has been a 

longstanding Commission objective.2  To advance this objective, the Commission first took steps 

in 1993 to establish a standard requiring the settlement of most securities transactions within three 

business days of trade date (“T+3”), shortening the prevailing practice at the time of settling 

securities transactions within five business days of trade date (“T+5”).3  The Commission has on 

multiple occasions discussed how shortening the settlement cycle can protect investors, reduce risk 

in the financial system, and increase operational efficiency in the securities market.4  In 2017, the 

                                                 
2  See Exchange Act Release No. 94196, Investment Advisers Act Release No. 5957 (Feb. 9, 

2022), 87 FR 10436 (Feb. 24, 2022) (“T+1 Proposing Release”). 

3  See Exchange Act Release No. 33023 (Oct. 6, 1993), 58 FR 52891 (Oct. 13, 1993) (“T+3 

Adopting Release”). 

4  See, e.g., Exchange Act Release No. 31904 (Feb. 23, 1993) 58 FR 11806 (Mar. 1, 1993) 

(“T+3 Proposing Release”); T+3 Adopting Release, supra note 3; Exchange Act Release No. 

78962 (Sept. 28, 2016), 81 FR 69240 (Oct. 5, 2016) (“T+2 Proposing Release”); Exchange Act 



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Commission shortened the standard settlement cycle from T+3 to T+2.5  Now, in part informed by 

episodes in 2020 and 2021 of increased market volatility that highlighted potential vulnerabilities 

in the U.S. securities market,6 the Commission believes that shortening the settlement cycle from 

T+2 to T+1 can promote investor protection, reduce risk, and increase operational and capital 

efficiency.7   

As discussed in the T+1 Proposing Release,8 the Commission believes that substantial 

progress has been made toward identifying the technological and operational changes that are 

necessary to establish a T+1 settlement cycle, including the industry-level changes that would be 

necessary to transition from a T+2 standard to a T+1 standard settlement cycle.  The Commission 

also discussed how additional regulatory steps were necessary to improve the processing of 

institutional transactions, advancing two other longstanding objectives shared by the Commission 

and the securities industry: the completion of trade allocations, confirmations, and affirmations on 

trade date (an objective often referred to as “same-day affirmation”) and the straight-through 

processing of securities transactions.9  Accordingly, the Commission proposed a combination of 

                                                 

Release No. 80295 (Mar. 22, 2017), 82 FR 15564, 15601 (Mar. 29, 2017) (“T+2 Adopting 

Release”); T+1 Proposing Release, supra note 2. 

5  See T+2 Adopting Release, supra note 4. 

6  See T+1 Proposing Release, supra note 2, at 10444 n.61. 

7  As stated in the T+1 Proposing Release, the Investor Advisory Committee recommended in 

2015 that the Commission pursue T+1 (rather than T+2), noting that retail investors would 

significantly benefit from a T+1 standard settlement cycle.  See id. at 10439 & nn.28–29. 

8  See id. at 10447. 

9  As discussed in the T+1 Proposing Release, the Commission uses “straight-through 

processing,” or “STP,” to refer generally to processes that allow for the automation of the entire 



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rule amendments and new rules to shorten the standard settlement cycle to T+1, establish new 

requirements for broker-dealers and investment advisers designed to advance the same-day 

affirmation objective, and to establish requirements for CMSPs to promote straight-through 

processing.10   

The Commission received many comments in response to the T+1 Proposing Release.11  

Having considered the comments received, the Commission is adopting the proposed new rules 

and rule amendments with modifications, as discussed further below.  Specifically, in Part II, the 

Commission discusses the comments received regarding the proposed amendments to Rule 15c6-1 

under the Exchange Act, and modifications made in response to the comments.  In Part III, the 

Commission discusses the comments received regarding proposed Rule 15c6-2 under the 

Exchange Act, and modifications made in response to the comments.  In Part IV, the Commission 

discusses the comments received regarding the proposed amendment to Rule 204-2 under the 

Advisers Act, and modifications made in response to the comments.  In Part V, the Commission 

discusses the comments received regarding proposed Rule 17Ad-27 under the Exchange Act, and 

modifications made in response to the comments.  In Part VI, the Commission discusses the 

comments received regarding the effect of shortening the settlement cycle on other Commission 

requirements, including Regulation SHO, Rule 10b-10 under the Exchange Act, the financial 

responsibility rules applicable to broker-dealers, requirements related to prospectus delivery and 

“access versus delivery,” and the impact on SRO rules and operations. 

                                                 

trade process from trade execution through settlement without manual intervention.  See id. at 

10458; see also infra note 323 and accompanying text. 

10  See T+1 Proposing Release, supra note 2, at 10436.  

11  Copies of all comment letters received by the Commission are available at 

https://www.sec.gov/comments/s7-05-22/s70522.htm. 

https://www.sec.gov/comments/s7-05-22/s70522.htm


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II. Exchange Act Rule 15c6-1 – Standard Settlement Cycle 

A. Proposed Amendments to Rule 15c6-1 

In the T+1 Proposing Release, the Commission proposed to amend Rule 15c6-1(a) to 

prohibit broker-dealers from effecting or entering into a contract for the purchase or sale of a 

security (other than an exempted security, a government security, a municipal security, commercial 

paper, bankers’ acceptances, or commercial bills) 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.12  The proposed amendment to 

Rule 15c6-1(a) would shorten the length of the standard settlement cycle for securities transactions 

covered by the existing rule from T+2 to T+1.13   

In addition to the proposed amendment to paragraph (a) of Rule 15c6-1, the Commission 

proposed to delete paragraph (c) of the rule,14 which would, in conjunction with the proposed 

amendment to paragraph (a), establish a T+1 standard settlement cycle for firm commitment 

offerings priced after 4:30 p.m. ET.  However, the so-called “override” provisions in paragraphs 

(a) and (d) of Rule 15c6-1 would continue to allow contracts currently covered by paragraph (c) to 

                                                 
12  See T+1 Proposing Release, supra note 2, at 10447.  

13  As explained in the T+1 Proposing Release, existing Rule 15c6-1(a) covers contracts for 

the purchase or sale of all types of securities except for the excluded securities enumerated in 

paragraph (a)(1) of the rule.  See id. at 10446.  The definition of the term “security” in section 

3(a)(10) of the Exchange Act covers, among others, equities, corporate bonds, unit investment 

trusts (“UITs”), mutual funds, exchange-traded funds (“ETFs”), American depository receipts 

(“ADRs”), security-based swaps, and options.  See id. at 10446 n.83.  Application of Rule 15c6-

1(a) extends to the purchase and sale of securities issued by investment companies (including 

mutual funds), private-label mortgage-backed securities, and limited partnership interests that are 

listed on an exchange.  See id. at 10446 nn.84–85. 

14  See id. at 10448–49. 



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provide for settlement on a timeframe other than T+1 if the parties expressly agree to a different 

settlement timeframe at the time of the transaction. 

In addition to proposing to delete paragraph (c) of Rule 15c6-1, the Commission proposed 

conforming technical amendments to paragraphs (a), (b), and (d) of the rule. Specifically, the 

Commission proposed to delete all references to paragraph (c) of Rule 15c6-1 that currently appear 

in paragraphs (a), (b), and (d) of the rule.15 

B. Comments 

1. Length of Standard Settlement Cycle and Exchange Act Rule 15c6-1(a) 

In response to the T+1 Proposing Release, the Commission received numerous comment 

letters supporting a shorter settlement cycle for securities transactions.16  Many of these comment 

                                                 
15  See id. at 10449. 

16  See, e.g., letters from Jaime N. Calaf (Feb. 9, 2022) (“Calaf Letter”); James Kelley (Feb. 9, 

2022) (“Kelley Letter”); Kyle (Feb. 9, 2022) (“Kyle 1 Letter”); Curtis Robinson (Feb. 9, 2022) 

(“Robinson 1 Letter”); Ryan, Business Owner (Feb. 9, 2022) (“Ryan 1 Letter”); L. Martin Stewart 

(Feb. 9, 2022) (“Stewart Letter”); Anthony LaBree (Feb. 10, 2022) (“LaBree Letter”); Nicolas 

Zach (Feb. 13, 2022) (“Zach Letter”); Richard Stauts (Feb. 14, 2022) (“Stauts Letter”); PressPage 

Entertainment Inc. (Feb. 15, 2022) (“PressPage Letter”); Peter Duggan, President, Securities 

Transfer Association (Apr. 1, 2022), at 2 (“STA Letter”); Kirsten Wegner, Chief Executive 

Officer, Modern Markets Initiative (Apr. 4, 2022), at 1 (“MMI Letter”); Hope Jarkowski, General 

Counsel, NYSE Group, Inc. (Apr. 6, 2022), at 1 (“NYSE Letter”); Keith Evans, Executive 

Director, Canadian Capital Markets Association (Apr. 9, 2022), at 1 (“CCMA April Letter”); 

Steven Wager, Chair, Americas Focus Committee, Association of Global Custodians (Apr. 11, 

2022), at 3 (“AGC April Letter”); Stephen Hall, Legal Director and Securities Specialist, and Jason 

Grimes, Senior Counsel, Better Markets, Inc. (Apr. 11, 2022), at 1 (“Better Markets Letter”); Paul 

Conn, President, Global Capital Markets, and Claire Corney, Senior Managing Director, 

Regulatory & Market Initiatives, Global Capital Markets, Computershare Limited (Apr. 11, 2022), 

at 1 (“Computershare Letter”); Birgitta Siegel, Esq., Adjunct Professor of Law, Cornell Law 

School Securities Law Clinic (Apr. 11, 2022), at 1 (“Cornell Law Letter”); Murray Pozmanter, 

Managing Director, Head of Clearing Agency Services & Global Business Operations, The 

Depository Trust and Clearing Corporation (Apr. 11, 2022), at 2 (“DTCC Letter”); Joanna Mallers, 

Secretary, FIA Principal Traders Group (Apr. 11, 2022), at 1 (“FIA PTG Letter”); Robert Adams, 

Chief Operations Officer, National Financial Services LLC (Apr. 11, 2022), at 1 (“Fidelity 

Letter”); Gail C. Bernstein, General Counsel, Investment Adviser Association (Apr. 11, 2022), at 1 



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letters supported shortening the standard settlement cycle to T+1.17  Several comment letters that 

supported the Commission’s proposal to shorten the settlement cycle to T+1 also supported 

shortening the settlement cycle to “T+0” or instantaneous settlement.18  Other comment letters 

                                                 

(“IAA April Letter”); Susan Olson, General Counsel, and Joanne Kane, Chief Industry Operations 

Officer, Investment Company Institute (Apr. 11, 2022), at 1 (“ICI Letter”); Jack Rando, Managing 

Director, The Investment Industry Association of Canada (Apr. 11, 2022), at 1 (“IIAC Letter”); 

Jennifer Han, Executive Vice President, Chief Counsel & Head of Regulatory Affairs, Managed 

Funds Association (Apr. 11, 2022), at 1 (“MFA Letter”); Joseph Kamnik, Chief Regulatory 

Counsel, The Options Clearing Corporation (Apr. 11, 2022), at 1 (“OCC Letter”); Fran Garritt, 

Director, Securities Lending & Market Risk, and Mark Whipple, Chairman, Committee on 

Securities Lending, Securities Lending Council of the Risk Management Association (Apr. 11, 

2022), at 3 (“RMA Letter”); Joseph Barry, Senior Vice President and Global Head of Regulatory, 

Industry and Government Affairs, State Street Corporation (Apr. 11, 2022), at 3 (“State Street 

Letter”); Robert McBey, Chief Executive Officer, Wilson-Davis & Co., Inc. (Apr. 14, 2022), at 1 

(“Wilson-Davis Letter”); Thomas M. Merritt, Deputy General Counsel, Virtu Financial, Inc. (Apr. 

11, 2022), at 1 (“Virtu Financial Letter”); Christopher A. Iacovella, Chief Executive Officer, 

American Securities Association (Apr. 12, 2022), at 1 (“ASA Letter”); Thomas Price, Managing 

Director, and Lindsey Weber Keljo, Head - Asset Management Group, Securities Industry and 

Financial Markets Association (Apr. 13, 2022), at 1–2 (“SIFMA April Letter”).   

17  See, e.g., AGC April Letter, supra note 16, at 3; ASA Letter, supra note 16, at 1; letter 

from Jaiden Baker (Feb. 19, 2022) (“Baker Letter”); Better Markets Letter, supra note 16, at 1; 

CCMA April Letter, supra note 16, at 1; Computershare Letter, supra note 16, at 1; Cornell Law 

Letter, supra note 16, at 2; DTCC Letter, supra note 16, at 2; FIA PTG Letter, supra note 16, at 1; 

Fidelity Letter, supra note 16, at 2; IAA April Letter, supra note 16, at 1; ICI Letter, supra note 16, 

at 1; IIAC Letter, supra note 16, at 1; Kyle 1 Letter, supra note 16, at 1; LaBree Letter, supra note 

16, at 1; MFA Letter, supra note 16, at 2; MMI Letter, supra note 16, at 1; NYSE Letter, supra 

note 16, at 1; OCC Letter, supra note 16, at 2; PressPage Letter, supra note 16, at 1; RMA Letter, 

supra note 16, at 3; Robinson 1 Letter, supra note 16, at 1; Ryan 1 Letter, supra note 16, at 1; 

SIFMA April Letter, supra note 16, at 3; STA Letter, supra note 16, at 2; State Street Letter, supra 

note 16, at 3; Stauts Letter, supra note 16, at 1; Stewart Letter, supra note 16, at 1; Wilson-Davis 

Letter, supra note 16, at 1; letter from Rebecca Womack (Feb. 18, 2022) (“Womack Letter”); Virtu 

Financial Letter, supra note 16, at 3; Zach Letter, supra note 16, at 1.  

18  See, e.g., Calaf Letter, supra note 16; letter from Degen Mahdere (Feb. 17, 2022) 

(“Mahdere Letter”); letter from Adam Rathbone (Feb. 17, 2022) (“Rathbone Letter”); letter from 

Hunter Gage Seeton (Feb. 18, 2022) (“Seeton Letter”); letter from Sam Oakes (Feb. 19, 2022) 

(“Oakes Letter”); letter from Matthew Risse (Feb. 19, 2022) (“Risse Letter”); letter from Ryan 

Webster (Oct. 31, 2022) (“Webster Letter”).  Several of the comment letters referred to “T+0” 



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were silent as to the Commission’s proposal to shorten the settlement cycle to T+1, but expressed 

the view that a T+0 settlement cycle should be implemented either immediately or as soon as 

possible.19 

Commenters supporting the Commission’s proposal to shorten the standard settlement 

cycle to T+1 cited a number of benefits that a T+1 settlement cycle would deliver to market 

participants.  For example, comment letters supporting a move to T+1 stated that shortening the 

settlement cycle to T+1 would result in reductions to existing levels of risk to central 

counterparties (“CCPs”) and market participants (including credit, market and liquidity risk), 20 

lower margin requirements,21 improved capital liquidity,22 improvements to post-trade processing 

                                                 

without explaining that term.  However, the T+1 Proposing Release defines T+0 as settlement no 

later than the end of trade date.  See T+1 Proposing Release, supra note 2, at 10436, 10438. 

19  See, e.g., letter from Mark C. (Feb. 19, 2022) (“Mark C. Letter”); letter from Saul Nevarez 

(Feb. 19, 2022) (“Nevarez Letter”); letter from Clinton Lawler (Feb. 19, 2022) (“Lawler Letter”); 

letter from Alex McKay (Feb. 19, 2022) (“McKay Letter”). 

20  See, e.g., DTCC Letter, supra note 16, at 2–3; Fidelity Letter, supra note 16, at 2; IAA 

April Letter, supra note 16, at 1; ICI Letter, supra note 16, at 1, 3; MFA Letter, supra note 16, at 

1; OCC Letter, supra note 16, at 2; RMA Letter, supra note 16, at 3; SIFMA April Letter, supra 

note 16, at 2; State Street Letter, supra note 16, at 4. 

21  See, e.g., Cornell Law Letter, supra note 16, at 3; DTCC Letter, supra note 16, at 2–3; 

Fidelity Letter, supra note 16, at 2; MMI Letter, supra note 16, at 2; State Street Letter, supra note 

16, at 4. 

22  See, e.g., DTCC Letter, supra note 16, at 2–3; MMI Letter, supra note 16, at 2; State Street 

Letter, supra note 16, at 4. 



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and operational efficiency,23 increased financial stability,24 and reduced systemic risk in the 

financial system.25  

In addition, several comment letters stated that shortening the settlement cycle to T+1 

would benefit retail investors.26  For example, one commenter stated that retail investors would 

benefit from a move to T+1 through increased certainty, safety, and security in the financial 

system; access to the proceeds, or purchases, of their securities transactions a day earlier; and 

aligning the settlement cycles for ETF transactions (which now settle on T+2) with the settlement 

cycle for mutual funds (which typically settle on T+1).27  Another commenter similarly stated that 

investors would benefit from earlier access to the proceeds of their securities transactions if the 

settlement cycle is shortened to T+1.28 

                                                 
23  See, e.g., Cornell Law Letter, supra note 16, at 3; DTCC Letter, supra note 16, at 2–3; IAA 

April Letter, supra note 16, at 1; RMA Letter, supra note 16, at 3; State Street Letter, supra note 

16, at 4. 

24  See, e.g., ICI Letter, supra note 16, at 1; MMI Letter, supra note 16, at 2. 

25  See, e.g., Fidelity Letter, supra note 16, at 2; MFA Letter, supra note 16, at 1; MMI Letter, 

supra note 16, at 2; RMA Letter, supra note 16, at 3; 

26  See, e.g., Better Markets Letter, supra note 16, at 2–3; Fidelity Letter, supra note 16, at 2; 

IIAC Letter, supra note 16, at 1; LaBree Letter, supra note 16, at 1; MMI Letter, supra note 16, at 

2; Robinson 1 Letter, supra note 16, at 1; Ryan 1 Letter, supra note 16, at 1; Stauts Letter, supra 

note 16, at 1; letter from Tate Winter (Feb. 17, 2022) (“Winter Letter”).  

27  See Fidelity Letter, supra note 16, at 2; see also ICI Letter, supra note 16, at 3 (stating that 

a T+1 settlement cycle would enhance funds’ cash and liquidity management; given that fund 

shares typically settle on a T+1 basis, a shorter settlement cycle would help align the settlement of 

a fund’s portfolio securities and the settlement of its shares). 

28  See Cornell Law Letter, supra note 16, at 3 (“If [the Commission’s T+1 proposal] were 

adopted, buyers and sellers would have access to their proceeds an entire day earlier relative to the 

T+2 settlement cycle.  If the public comments submitted to date are any indication, this is of 

paramount concern to the lay investor.”). 



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The Commission also received comment letters that raised concerns regarding the 

Commission’s proposal to shorten the standard settlement cycle to T+1.29  These commenters, 

some of which were supportive of shortening the settlement cycle as a general matter, raised 

concerns about the prospective impact of mismatched settlement cycles across global markets that 

would result if the settlement cycle in the U.S. is shortened to T+1 without global coordination and 

harmonization of settlement cycles.30  For example, a comment letter submitted by an industry 

association representing the alternative investment industry stated that the T+1 Proposing Release 

“raises considerable risks for asset managers with primary or significant exposure to markets that 

will remain at T+2.”31  The comment letter further stated that “[i]n absence of further global 

coordination, the resulting market misalignment from the move to T+1 poses a number of harmful 

unintended consequences to these asset managers, their counterparties and overall market health 

                                                 
29  See, e.g., letters from Jiří Król, Deputy CEO, Global Head of Government Affairs, 

Alternative Investment Management Association (Apr. 11, 2022), at 2 (“AIMA Letter”) 

(commending the Commission’s intended efforts to reduce risk in the U.S. settlement cycle and 

improve efficiency in post-trade processing); Kristin Swenton Hochstein et al., International 

Securities Association for Institutional Trade Communication (Apr. 8, 2022), at 2–7 (“ISITC 

Letter”) (not advocating for or against shortening the U.S. settlement cycle to T+1, but identifying 

certain challenges associated with moving to T+1); Scott Pintoff, General Counsel, MarketAxess 

Holdings Inc. (Apr. 11, 2022), at 1 (“MarketAxess Letter”) (generally favoring a shortening of the 

standard settlement cycle for most bond transactions from T+2 to T+1); State Street Letter, supra 

note 16, at 4; Virtu Financial Letter, supra note 16, at 2–3. 

30  Several of the comment letters that raised concerns regarding the Commission’s proposal to 

shorten the settlement cycle to T+1 also raised concerns regarding proposed Rule 15c6-2.  Those 

comments are discussed separately in Part III.B below. 

31  AIMA Letter, supra note 29, at 2.  The AIMA Letter also cites to a letter AIMA submitted 

to Commission staff on October 27, 2021, which further details the concerns raised in the AIMA 

Letter.  AIMA’s 2021 submission to Commission staff was resubmitted to the Commission as an 

Annex to the AIMA Letter. 



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and stability.”32  The commenter’s letter references specifically “misalignment concerns” relating 

to FX settlement risk,33 international banking and coordination issues, and collateral/liquidity 

risk.34   

With respect to FX settlement risk, the commenter stated that accelerating the U.S. 

settlement cycle to T+1 raises the risk that transaction funding dependent on FX “may not occur on 

time.”35  The commenter further stated that alternative sources of funding for U.S. trades on T+1 

may therefore need to be in place, which may increase costs and create allocation inefficiencies 

that may dissuade participation in U.S. markets.36   

                                                 
32  Id. 

33  The comment letters that use the term “FX” do not define the term, but “FX” is commonly 

used to refer to foreign currency exchange.  Market participants often rely on FX trades executed 

in the “spot” markets in order to fund securities transactions in the U.S. markets that settle in U.S. 

dollars, and the settlement cycle for spot FX transactions is typically T+2.  However, spot 

transactions in certain FX pairs (e.g., U.S. dollars vs. Canadian dollars) settle on T+1. 

34  AIMA Letter, supra note 29, at 5–6.  The commenter explained its concerns relating to 

international banking and coordination issues by stating that “the rigid deadlines of banking 

systems pose a significant risk, as do simple time zone or calendar differences that otherwise can 

be accommodated by a T+2 settlement cycle.”  Id. at 5.  The commenter further stated that foreign 

banking deadlines and cutoff times for transaction processing in related markets must be carefully 

re-examined to ensure activity can be harmonized in an accelerated U.S. settlement framework.  

Id. 

35  Id.  The commenter further stated that settlement of FX transactions generally occurs on 

T+2, “although the period of irrevocability—between the unilateral cancellation deadline for the 

sold currency and actual receipt of the bought currency—can extend well beyond T+1.”  Id. 

36  Id.  The commenter further stated that “unilateral cancelation deadlines may need to be 

considered” for FX transactions.  Id.  The length of such deadlines may impact when an FX 

transaction can be settled, in turn affecting the time it may take to secure funding for a securities 

transaction.  The T+1 Report also states that such unilateral cancelation deadlines may need to be 

considered, and discusses how these deadlines may impact asset managers if the settlement cycle 

for securities transactions is shortened to T+1.  See T+1 Report, infra note 61, at 17.  The term 

“unilateral cancelation deadline” generally refers to the point in time after which a bank is no 

longer guaranteed that it can recall, rescind or cancel (with certainty) a previously submitted 



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With respect to the commenter’s concerns regarding collateral and liquidity risks, the 

commenter stated that the above-described FX and coordination issues threaten asset managers’ 

ability to ensure funding is available in time to settle their U.S. trades on T+1.37  According to the 

commenter, uncertainty regarding collateral for settlement may mean that foreign asset managers 

would need to redeem money market funds to meet their financing needs, or forego transacting in 

U.S. markets in order to comply with the accelerated settlement requirements.38  Ultimately, the 

commenter stated, trade financing issues will lead to both significantly lower trading volume and 

lower overall liquidity, which pose a very real risk to overall market health and stability.39 

Another commenter was concerned that there may not be sufficient time for investment 

advisers to match foreign currency amounts to settle all trades on T+1, citing various factors that 

would make it costly and difficult for investment advisers to execute FX after the U.S. market 

close.40  This commenter also stated that because FX transactions largely settle on a T+2 basis, 

                                                 

payment instruction.  This deadline varies depending on the currency pair being settled, 

correspondent payment system practices, and operational, service and legal arrangements.  See 

Bank for International Settlements, SUPERVISORY GUIDANCE FOR MANAGING RISKS ASSOCIATED 

WITH THE SETTLEMENT OF FOREIGN EXCHANGE TRANSACTIONS (Feb. 2013), available at 

https://www.bis.org/publ/bcbs241.pdf.  See infra notes 617–619 and accompanying text (further 

discussing the anticipated economic effects resulting from mismatched settlement cycles). 

37  AIMA Letter, supra note 29, at 5.    

38  Id. 

39  Id. 

40  See IAA October Letter, infra note 222, at 3 (observing that there are circumstances in 

which a U.S.-based FX trading desk will switch over to its Asia-based FX trading desk upon the 

U.S. market close to provide ongoing liquidity, but not on Friday evenings, and certain asset 

owners and managers, including Sovereign Wealth Funds, only trade from their country of 

domicile). 

https://www.bis.org/publ/bcbs241.pdf


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market participants that seek to fund a cross-border securities transaction with the proceeds of an 

FX transaction would be required to settle the securities transaction before the proceeds of the FX 

transaction become available and pre-fund these securities transactions, which would potentially 

adversely impact client performance and increase operating and settlement risk for advisers.  The 

commenter said that while both domestic and internationally based investment advisers would be 

impacted by these issues, non-U.S.-based investment advisers would face additional expenses 

because they would need to set up an FX trading and settlement presence in the U.S., or add staff 

abroad to create, execute, and settle FX transactions to meet a T+1 timeline.41 

Another commenter that operates a broker-dealer and an electronic trading platform for 

corporate bonds stated that it had “serious reservations regarding the impact the proposed 

amendments to Rule 15c6-1(a) and Rule 15c6-2 will have on cross border trading unless, and until, 

other global financial markets also shorten their settlement cycle.”42  Specifically, the commenter 

stated that if the U.S. settlement cycle is shortened to T+1 while other major global financial 

centers remain on a T+2 settlement cycle, “there will be increased operational cost and significant 

settlement risks associated with multi-leg cross border transactions.”43   

The commenter further stated that it expects mismatched settlement cycles would result in 

increased financing costs associated with transactions in which a U.S. market participant is selling 

                                                 
41  Id. at 4 (suggesting certain actions the Commission could take to reduce disruption in FX 

markets, such as by (i) working with other regulators and market participants to support the move 

to T+1 by, among other things, modifying the FX and equity trading day(s) in the U.S., and (ii) 

“allow[ing] for a mismatch of FX settlement dates as a valid reason for T+2 settlement 

arrangements without it breaching an investment adviser’s best execution obligation”). 

42  MarketAxess Letter, supra note 29, at 1.  

43  Id. at 2. 



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to a cross-border participant because “we will be forced to receive (and pay for) a securities 

position on T+1 for the U.S. leg, but generally be unable to onward deliver the position on the 

foreign leg until T+2.”44  In this scenario, the commenter stated that it would need to fund the 

position until the next settlement cycle.45   

Additionally, the commenter stated its expectation that there will be a significant number of 

settlement fails when the U.S. participant is buying bonds and the cross-border participant is 

unable to deliver the bonds until T+2.46  The commenter further argued that if the Commission’s 

T+1 proposal is adopted and other financial markets do not move in lock-step, the increase in 

financing costs and settlement fails in connection with cross-border transactions may force broker-

dealers to decrease or cease offering cross-border services to their clients.47  Lastly, the commenter 

argued that any decrease or cessation of cross-border trading ultimately will reduce liquidity for 

U.S. investors.48  For these reasons, the commenter encouraged the Commission to work with 

international regulators to coordinate a move to T+1 settlement on a global basis if possible.49     

                                                 
44  Id. 

45  Id. 

46  Id. 

47  Id. 

48  Id. 

49  Id. 



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Another commenter stated that there may not be sufficient time for investment advisers to 

match foreign currency amounts to settle all trades on T+1.50  In particular the comment 

highlighted the lack of time between the closure of the equity markets (at 4:00 p.m. ET in the U.S.) 

and the time when U.S.-based FX trading desks close for the evening (usually an hour or so 

later).51  The commenter also discussed the reasons it believed that “Far East” trading desks may 

not seamlessly take over after the close of U.S.-based FX trading desks.52  According to the 

commenter, these issues may impact both domestic and internationally based investment 

advisers.53  However, in the commenter’s view, non-U.S. based investment advisers will face 

additional expenses, as they will either be forced to set up an FX trading and settlement presence 

in North America (or Asia) or add staff abroad to create, execute, and settle FX transactions to 

meet a T+1 timeline.54 

Finally, the commenter suggested certain “options” for actions that could be taken to 

reduce disruption in the FX markets.  While recognizing that some of these options would be 

“troublesome to implement,” the commenter stated that two would be the most effective in 

alleviating the commenter’s concerns.55  First, the commenter suggested that appropriate market 

                                                 
50  Letter from Suzanne Quinn, Head of North America Compliance, Ballie Gifford Overseas 

Limited (Nov. 17, 2022), at 1 (“Ballie Gifford Letter”). 

51  Id. 

52  Id. at 1–2. 

53  Id. at 2. 

54  Id. 

55  Id.Conformed to Federal Register version 

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authorities mandate a change in “the official equity trading day” for U.S. markets to close one hour 

earlier, at 3:00 p.m. rather than 4:00 p.m. ET, which would provide firms more time to match 

trades and ensure the settlement FX is in place for the following day, without negatively impacting 

liquidity and trading volume.56  Second, the commenter stated that the Commission could allow for 

a mismatch of FX settlement dates as a valid reason for T+2 settlement arrangements “without 

[such arrangements] breaching an investment adviser’s best execution obligation.”57 

In the proposing release, the Commission asked commenters whether efforts to shorten the 

standard settlement cycle to T+1 is a logical step on the path to T+0 settlement, or would moving 

to a T+1 standard settlement cycle require investments or processes that would be outdated or 

unnecessary in a T+0 environment.58  Although no commenters discussed whether moving to a 

T+1 standard settlement cycle would require investments or processes that would be outdated or 

unnecessary in a T+0 environment, as discussed below, the Commission received numerous 

comments relating to T+0 settlement.   

Several of the commenters that supported moving to a T+1 settlement cycle also stated that 

moving to a T+0 settlement cycle, or instantaneous settlement, is either not achievable or not 

practical in the near term.59  These commenters cited several challenges associated with a 

                                                 
56  Id. 

57  Id.; see also supra note 41 and accompanying text (discussing the same, including other 

related recommendations from the IAA).  

58  See T+1 Proposing Release, supra note 2, at 10450. 

59  See, e.g., DTCC Letter, supra note 16, at 6 (“[W]e do not believe the industry is currently 

ready to move to a T+0 standard settlement cycle . . .”); FIA PTG Letter, supra note 16, at 1–2; 

MMI Letter, supra note 16, at 3 (expressing commenter’s concern that a move to T+0 would be 

potentially infeasible in the short term); NYSE Group Letter, supra note 16, at 2 (expressing 

commenter’s view that T+0 settlement cycle is not practical in the near term); OCC Letter, supra 



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prospective move to a T+0 settlement cycle, 60 including in the case of several comment letters, 

many of the same challenges that were cited in the “T+1 Report,” which the Commission 

discussed in the T+1 Proposing Release.61  For example, one commenter stated that moving to T+0 

“would require the redesign of many securities processing functions, including [i]nstitutional 

[t]rade [p]rocessing, ETFs processing, options, margin investing, securities lending, FX markets, 

and global settlements across jurisdictions to meet the regulatory, operational, and contractual 

requirements.”62  Another commenter stated that: 

[I]mplementing T+0 as the required standard settlement cycle across 

the industry remains a significant undertaking that would require 

foundational changes to the way securities trade and settle today.  

                                                 

note 16, at 4 (“OCC agrees with the consensus view reflected in [the T+1 Report] that same-day 

settlement is not achievable in the short-term, and that moving towards shortening the settlement 

cycle to T+0 would require an overhaul of the U.S. clearing and settlement infrastructure.”); 

SIFMA April Letter, supra note 16, at 15–20 (expressing commenter’s view that T+0 settlement is 

not practical in the near term); Virtu Financial Letter, supra note 16, at 3–4 (“T+0 [settlement] is 

not feasible or attainable at this time.”). 

60  See, e.g., DTCC Letter, supra note 16, at 5; NYSE Group Letter, supra note 16, at 2 (“T+0 

settlement cycle would pose significant challenges to the industry, including eliminating the 

benefits of netting for settling trades, requiring that every transaction be funded instantly and 

individually, and additional complexities for foreign investors, options, ETFs and futures.”); 

SIFMA April Letter, supra note 16, at 16 (describing numerous challenges associated with moving 

to T+0 settlement); Virtu Financial Letter, supra note 16, at 3–4 (describing various challenges 

associated with moving to T+0 settlement); see also State Street Letter, supra note 16, at 5–10 

(providing high-level observations on the implications of same-day settlement for various 

operational processes and investment products which are central to the custody bank business 

model). 

61  See T+1 Proposing Release, supra note 2, at 10438, 10445 (citing to Deloitte & Touche 

LLP, the Depository Trust and Clearing Corporation, the Investment Company Institute, and 

Securities Industry and Financial Markets Association, Accelerating the U.S. Securities Settlement 

Cycle to T+1 (Dec. 1, 2021) (“T+1 Report”), https://www.sifma.org/wp-

content/uploads/2021/12/Accelerating-the-U.S.-Securities-Settlement-Cycle-to-T1-December-1-

2021.pdf). 

62  SIFMA April Letter, supra note 16, at 16 (quoting T+1 Report, supra note 61). 

https://www.sifma.org/wp-content/uploads/2021/12/Accelerating-the-U.S.-Securities-Settlement-Cycle-to-T1-December-1-2021.pdf
https://www.sifma.org/wp-content/uploads/2021/12/Accelerating-the-U.S.-Securities-Settlement-Cycle-to-T1-December-1-2021.pdf
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Moreover, moving the entire industry to a T+0 standard settlement 

cycle would necessitate significant changes in industry conventions 

and major investments in automating processes and technology that 

will greatly exceed similar investments needed for T+1.63 

Another commenter argued that moving to T+0 would require a “rewrite” of not only the 

current clearing and settlement infrastructure, but also the associated banking, securities custodian, 

and money market systems that are critical components of the clearing and settlement ecosystem.64  

This commenter further stated that moving to T+0 settlement would potentially require 

implementation of real-time currency movements during hours of the day at which such processes 

are not feasible.65  In particular, the commenter argued, “[n]ot only would this require major 

system upgrades, but as critical components of the settlement process, banks, wire systems, 

custodians, lenders, and money market funds, along with related staff, would need to be available 

well into the evening.”66 

Another commenter stated that T+0 settlement would present logistical concerns around 

borrowing and lending and would likely introduce challenges for batch processing.67  More 

specifically, this commenter stated that while it is possible that trades could be netted throughout 

the day, it is unlikely that batch processing could capture all trades by the market close, and such 

                                                 
63  DTCC Letter, supra note 16, at 5 

64  FIA PTG Letter, supra note 16, at 1. 

65  Id. 

66  Id. at 1–2. 

67  See Virtu Financial Letter, supra note 16, at 3–4. 



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netting could lead to multiple intraday margin calls by clearing agencies.68  The same commenter 

stated that in a T+0 settlement environment it would be very difficult for investment advisers to 

process real-time trade allocations.69  Additionally, the commenter argued that prime brokers 

would be required to overhaul their processes and technology to capture allocations, calculate 

margin requirements, ensure margin accuracy, and facilitate trade reporting and disaffirmations.70  

Finally, the commenter stated that moving to T+0 would require “complete dematerialization of 

securities.”71 

Other commenters argued that any move to shorten the settlement cycle to T+0 should be 

considered only after a successful transition to T+1.72  One such commenter stated that once the 

industry has established the full scope of work required for T+1 and is actively progressing 

towards implementation, the industry should conduct a “full review” to identify the scope of 

changes that are needed to effectuate a move to a T+0 standard settlement cycle.73   

                                                 
68  Id. 

69  Id. 

70  Id. 

71  Id. 

72  See, e.g., AGC April Letter, supra note 16, at 3–4; DTCC Letter, supra note 16, at 5; see 

also letter from Isabelle S. Corbett, Global Head of Government Relations, R3 LLC, at 3 (“R3 

Letter”) (supporting the view that “T+0 does not make sense today,” and stating that “further 

compression from T+1 should continue to be considered”); ASA Letter, supra note 16, at 3 

(arguing that the market is not prepared to move to T+0, and urging the Commission to continue to 

study and solicit public feedback on moving to T+0 rather than using the Commission’s T+1 

proposal as a vehicle to accelerate that shift). 

 
73  See, e.g., DTCC Letter, supra note 16, at 5. 



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Another commenter stated that moving to a T+0 settlement cycle would require significant 

industry and regulatory discussion, and technological upgrades and change, as well as the creation 

and implementation of new operating models and processes in many instances,74 but believed that 

the transition to a T+1 settlement cycle would be a valuable step towards T+0, as the industry 

would learn lessons that can be used to evaluate if and how a T+0 settlement cycle can be achieved 

in the longer term.75  However, according to the commenter, industry discussions on implementing 

T+0 at this time “may inadvertently divert resources from focusing on the requirements and issues 

related to delivering T+1 in the near future.”76   

Those commenters supporting an immediate move to T+0 or instantaneous settlement 

neither explained how either T+0 settlement or instantaneous settlement could be implemented, 

nor addressed the impediments to T+0 settlement that were cited by several of the commenters 

who argued that T+0 settlement is not achievable or not practical in the near term.  Nor did the 

comment letters supporting a T+0 settlement cycle or instantaneous settlement explain how a 

settlement cycle shorter than T+1 would reduce overall levels of risk in the clearance and 

settlement system.  These letters generally consisted of declaratory statements to the effect that 

either T+0 or instantaneous settlement is achievable now and should be implemented without 

delay, while offering no factual support for these views.77   

                                                 
74  AGC April Letter, supra note 16, at 3. 

75  See id. at 3–4. 

76  Id. at 4. 

77  See, e.g., Calaf Letter, supra note 16; Clemens Letter, supra note 18; Mahdere Letter, 

supra note 18; Nevarez Letter, supra note 19; Oakes Letter, supra note 18; Rathbone Letter, supra 

note 18; Seeton Letter, supra note 18.   



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2. Securities Excluded from Requirements under Exchange Act Rule 15c6-1 

The Commission also received comment letters discussing certain types of securities that 

the respective commenters believed should be excluded from the requirements under Exchange 

Act Rule 15c6-1, whether through amendment to the text of the rule or via separate exemptive 

relief.  Two of these commenters discussed whether Rule 15c6-1 should apply to security-based 

swap transactions78 and both expressed the view that the rule should not apply to such 

transactions.79  One of the two commenters stated that Rule 15c6-1 is “inapt” with respect to 

security-based swap transactions, which are “generally bilateral and executory in nature,” meaning 

that there are numerous terms that the parties typically agree to fulfill at later dates.80  This 

commenter further stated that “the [Dodd-Frank Wall Street Reform and Consumer Protection Act 

(“Dodd-Frank Act”)] mandated numerous requirements for security-based swaps that address the 

very credit, market and liquidity risks that, for broker-dealer transactions in securities, are 

addressed by the shortening of the settlement cycle from T+2 to T+1.”81  Because security-based 

                                                 
78  See MFA Letter, supra note 16, at 2; SIFMA April Letter, supra note 16, at 11–12.  As 

noted in the T+1 Proposing Release, the Commission previously issued an order that exempted 

security-based swaps from the requirements under Rule 15c6-1, and subsequently extended that 

exemptive relief on several occasions, but the exemptive relief that previously covered compliance 

with Rule 15c6-1 expired in 2020.  See T+1 Proposing Release, supra note 2, at 10446 n.83. 

79  See MFA Letter, supra note 16, at 2; SIFMA April Letter, supra note 16, at 11–12.  In 

addition to the comment letters discussing the prospective application of Rule 15c6-1 to security-

based swap transactions, the Commission received a small number of comment letters that 

recommended the continuation and/or expansion of certain regulatory relief from Rule 15c6-1 

previously provided by the Commission in certain exemptive orders.  These comments are 

discussed in Part II.B.5, which follows discussion of the comment letters that relate more directly 

to the text of Rule 15c6-1. 

80  SIFMA April Letter, supra note 16, at 11. 

81  Id. 



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swaps are already subject to a comprehensive regulatory regime, the commenter stated, these 

securities should not be subject to further regulation under the Commission’s proposal.82   

The same commenter highlighted certain “key differences” between security-based swaps 

and other types of securities.83  In particular, the commenter stated that for other types of 

securities, such as equity or debt, settlement occurs when the buyer receives the security purchased 

and the seller receives cash equaling the value of the security sold.84  For security-based swaps, 

however, a final net payment is paid by one party to the other at a future point in time to which the 

parties have contractually agreed.85  For all of these reasons, the commenter argued, the 

Commission should provide an express exclusion for security-based swaps, and “at the very least, 

any doubt caused by the reference in the [T+1 Proposing release] to security-based swaps should 

be resolved by [the Commission] clarifying that counterparties to such instruments, who generally 

agree to specific payment and settlement terms in writing, benefit from the existing override 

provision in [Rule 15c6-1(a)].”86 

The other comment letter discussing the prospective application of Rule 15c6-1 to security-

based swaps argued that the rule “should not apply to security-based swap transactions effected by 

a ‘security-based swap dealer,’ which is dually registered as a broker-dealer.”87  In support of this 

                                                 
82  Id. 

83  Id. 

84  Id. 

85  Id. 

86  Id. 

87  MFA Letter, supra note 16, at 2. 



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argument, the commenter stated that security-based swap transactions are typically bilateral 

transactions between sophisticated counterparties who deal directly with each other, and which are 

subject to unique capital, margin, and segregation requirements.88  Thus, according to the 

commenter, “there is no principled basis to apply Rule 15c6-1 to security-based swap transactions 

solely for the reason that a security-based swap dealer is also registered as a broker-dealer.”89  

Instead, the commenter argued, the Commission should modify the rule to exempt, or further 

exemptive relief should be provided for, security-based swaps “as noted in the [T+1 Proposing 

Release].”90 

3. Proposed Deletion of Rule 15c6-1(c) 

The Commission received one comment letter responding to the proposed deletion of 

paragraph (c) of Rule 15c6-1, and the commenter recommended that paragraph (c) be retained in a 

modified form, rather than being deleted. 91  Specifically, the commenter recommended that 

paragraph (c) be retained but modified to allow parties to settle on T+2, rather than T+1, in the 

case of a firm commitment underwriting.92  Under the commenter’s recommended modification, 

Rule 15c6-1(c) would provide a “fallback” to parties without an explicit agreement at the time of 

the transaction to settle on T+2 if unforeseen circumstances interfere with either party’s ability to 

                                                 
88  See id. 

89  Id. 

90  See id.; see also id. at n.11 (citing to T+1 Proposing Release, supra note 2, at 10446 n.83). 

91  See SIFMA April Letter, supra note 16, at 9–11. 

92  See id. at 10. 



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conform to a T+1 settlement date.93  The commenter also supported the continued retention of 

paragraph (d) of Rule 15c6-1, stating that paragraph (d) is “critically important for debt and 

preferred equity offerings.”94 

In support of the view that the Commission should retain a modified version of Rule 15c6-

1(c), the commenter stated that reliance on paragraphs (a) and (d) would be insufficient to prevent 

transactions for securities priced after 4:30 p.m. ET from failing to settle.95  Specifically, the 

commenter stated that while paragraphs (a) and (d) allow parties to agree to a longer settlement 

cycle, in order for the parties to avail themselves of that extended settlement date they must reach 

that agreement at the time of the transaction.96   

The commenter further stated that, “particularly in the context of common stock offerings, 

where an extended settlement is extremely difficult to implement, if specific issues are identified 

prior to pricing of the offering, in practically all such instances, the pricing of the offering would 

be delayed.”97  According to the commenter, the parties are “by definition” unable to foresee 

“unanticipated issues” prior to pricing of the offering.98   

Thus, the commenter stated that paragraphs (a) and (d) of Rule 15c6-1 would not allow 

parties to agree to a longer settlement cycle when circumstances unforeseen at the time of the 

                                                 
93  Id. at 10–11. 

94  Id. at 11. 

95  See id. at 10. 

96  See id. 

97  Id. 

98  Id. 



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pricing of the transaction arise that prevent settlement on T+1.99  For example, according to the 

commenter, “it is not unusual to face unanticipated issues relating to transfer agents, legend 

removal, local law matters (including local court approval), medallion guarantees or non-U.S. 

parties.”100  Finally, in support of the commenter’s belief that eliminating paragraph (c), together 

with a move to T+1, would lead to increased failures to settle trades with respect to firm 

commitment underwritings, the commenter cited the limited timeframe that would be available “to 

resolve issues” prior to settlement on T+1.101 

4. Retention of Exchange Act Rule 15c6-1(d) 

Paragraph (d) of Rule 15c6-1 provides that for purposes of paragraphs (a) and (c) of the 

rule, parties to a contract shall be deemed to have expressly agreed to an alternate date for payment 

of funds and delivery of securities at the time of the transaction for a contract for the sale for cash 

of securities pursuant to a firm commitment offering if the managing underwriter and the issuer 

have agreed to such date for all securities sold pursuant to such offering and the parties to the 

contract have not expressly agreed to another date for payment of funds and delivery of securities 

at the time of the transaction.102  The proposed rule text did not make any changes to paragraph (d) 

of Rule 15c6-1 other than technical conforming changes that would have been necessary if the 

Commission adopted the proposed deletion of paragraph (c) of the rule.103 

                                                 
99  See id. 

100  Id. 

101  Id. 

102  See 17 CFR 240.15c6-1(d). 

103  See T+1 Proposing Release, supra note 2, at 10448–49. 



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The Commission received one comment letter supporting the retention of paragraph (d) 

because, according to the commenter, it is “critically important for debt and preferred equity 

offerings.”104  However the comment letter did not further explain why paragraph (d) is important 

for such offerings.   

5. Exemptive Orders under Exchange Act Rule 15c6-1(b) 

The T+1 Proposing Release stated that, pursuant to Rule 15c6-1(b), the Commission has 

granted certain exemptions from the requirements under Rule 15c6-1, including an exemption for 

securities that do not have facilities for transfer or delivery in the U.S.105  The T+1 Proposing 

Release requested public comment on whether the conditions set forth in the Commission’s 

exemptive order for securities traded outside the U.S. are still appropriate, and whether the 

exemption should be modified.106  The Commission received several comment letters discussing 

whether the Commission should continue the exemption for foreign securities if the settlement 

cycle were shortened to T+1, and all of these commenters urged the Commission to retain the 

exemption, and/or recommended that the Commission make certain modifications to the 

exemption that would expand the scope of the exemption.107 

One commenter recommended that the Commission retain this exemption and explicitly 

state in the adopting release that the permissible settlement period for securities traded outside of 

                                                 
104  See SIFMA April Letter, supra note 16, at 11. 

105  See T+1 Proposing Release, supra note 2, at 10446–47 (citing to Exchange Act Release 

No. 35750 (May 22, 1995), 60 FR 27994, 27995 (May 26, 1995)). 

106  See T+1 Proposing Release, supra note 2, at 10451. 

107  See Fidelity Letter, supra note 16, at 5; SIFMA April Letter, supra note 16, at 1, 7–9; Virtu 

Financial Letter, supra note 16, at 2; see also ICI Letter, supra note 16, at 4. 

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the U.S. should be defined by the local market.108  The commenter stated that settling trades with 

different time zones is already a difficult process and accelerating the settlement cycle for these 

securities would make cross-border transactions even more challenging.109 

Another commenter stated that the exemption for foreign securities should be retained and 

modified to address “certain product misalignment matters.”110  This commenter observed that in 

many non-U.S. markets today, trades settle on a T+2 basis.111  Therefore, the commenter stated, 

unless those markets transition to a T+1 settlement timeframe when the U.S. moves to a T+1 cycle, 

U.S. broker-dealers will not be able to comply with Rule 15c6-1 for trades in foreign securities.112 

Additionally, according to the commenter, retaining the exemption for transactions in 

foreign securities in non-U.S. markets would not address the misalignment of settlement cycles 

between U.S. securities and non-U.S. securities that impacts U.S. securities that are exchangeable 

for a foreign security or a basket of foreign securities.113  The commenter highlighted in particular 

ADRs, and ETFs with an underlying basket of foreign securities, which according to the 

commenter, illustrate this misalignment.114 

                                                 
108  See Fidelity Letter, supra note 16, at 5. 

109  See id. 

110  SIFMA April Letter, supra note 16, at 7–9. 

111  Id. at 7. 

112  See id. 

113  See id. at 8. 

114  See id.  As noted in the T+1 Proposing Release, under the Commission’s existing 

exemption, an ADR is considered a separate security from the underlying security.  Thus, if there 

are no transfer facilities in the U.S. for a foreign security but there are transfer facilities for an 



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With respect to ADRs, the commenter stated that market makers and other market 

participants may purchase foreign shares and sell related ADRs in the U.S. on the same trading 

day, and thus timely settle the sale of the ADRs using the newly created ADRs.115  According to 

the commenter, this type of trade will not be possible if the underlying foreign shares settle on T+2 

and the related ADR is required to settle on T+1.116  The result, the commenter stated, is likely to 

be wider bid-ask spreads for the ADR because market makers must take into account the additional 

cost of borrowing securities and other financing costs to avoid settlement failures.117  Additionally, 

the commenter argued, the incidence of fails would likely increase as a result of the misaligned 

settlement cycles, particularly where it is not possible to borrow securities to make delivery, and a 

knock-on effect could be to increase the incidence of buy-ins as well.118 

Separately, the same commenter argued that the ETF creation/redemption process is 

impacted by the misalignment of global securities transaction settlement cycles where the basket of 

securities underlying an ETF includes foreign securities.119  In explaining this view, the commenter 

observed that ETF shares are created by an authorized participant (“AP”) depositing the daily 

creation basket of shares (and/or cash) with the ETF and, in exchange for the deposit of the basket, 

                                                 

ADR based on such foreign security, only the foreign security will be exempt from Rule 15c6-1.  

See T+1 Proposing Release, supra note 2, at 10446. 

115  See SIFMA April Letter, supra note 16, at 8. 

116  See id. 

117  See id. 

118  See id. 

119  See id. 



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the ETF issues to the AP a specified number of ETF shares, referred to as a “creation unit.”120  The 

commenter further stated that if foreign securities comprise some or all of the ETF creation basket, 

the AP will typically need to purchase those securities in the local market.121 

Another commenter urged the Commission to “exempt from T+1 settlement” U.S.-listed 

ETFs with baskets that contain foreign securities and ADRs.122  In support of this 

recommendation, the commenter stated that the misalignment in settlement cycles between the 

U.S. and foreign jurisdictions that continue to settle on a T+2 basis, coupled with time zone 

differences, may increase certain risks, such as failed trades, accrual differences, net asset value 

miscalculations, and investment guideline breaches.  The same commenter stated that due to the 

resulting misalignment in settlement cycles between the U.S. and foreign markets upon 

transitioning to T+1, an ADR provider may incur borrowing and other costs related to the 

underlying foreign security to facilitate T+1 settlement of the ADR.123  According to the 

commenter, these costs would likely be passed down to investors and thus make it more expensive 

to obtain investment exposure to foreign markets.124 

As discussed in the T+1 Proposing Release, the Commission has also previously granted a 

separate exemption from Rule 15c6-1 for contracts for the purchase or sale of any security issued 

                                                 
120  Id. 

121  See id. 

122  See ICI Letter, supra note 16, at 4; see also Virtu Financial Letter, supra note 16, at 2 

(recommending that for primary creations and redemptions alternative settlement date options be 

available so the foreign security basket and the U.S. ETF settlement can be “in sync”). 

123  See id. 

124  See id. 



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by an insurance company (as defined in section 2(a)(17) of the Investment Company Act) that is 

funded by or participates in a “separate account” (as defined in section 2(a)(37) of the Investment 

Company Act), including a variable annuity contract or a variable life insurance contract, or any 

other insurance contract registered as a security under the Securities Act of 1933 (“Securities 

Act”).125  In granting this exemption, the Commission recognized that “the mechanics of purchases 

and redemptions of insurance securities products are distinct from those of other securities and 

that, because of the time required to complete necessary preparations, such transactions typically 

require more protracted settlement periods,” and that “compliance with the unique requirements of 

state and Federal law, as well as of the particular administrative procedures, applicable to 

insurance securities products demands additional time beyond the standard settlement process.”126  

The T+1 Proposing Release requested public comment on whether the conditions set forth in the 

exemptive order for insurance products continued to be appropriate, or if they should be modified.  

The three commenters that discussed this exemption uniformly agreed that the conditions 

and considerations set forth in the Insurance Products Exemption Order apply as much today, if 

not with greater force, as when the Commission adopted the exemption in 1995 (and which it left 

in place in 2017), and that the exemption should be preserved.127  In support of this view, one 

                                                 
125  See T+1 Proposing Release, supra note 2, at 10447. 

126  Exchange Act Release No. 35815 (June 6, 1995), 60 FR 30906, 30907 (June 12, 1995) 

(“Insurance Products Exemption Order”). 

127  See letter from Eversheds Sutherland (US) LLP for the Committee of Annuity Insurers 

(Apr. 11, 2022), at 1–3; (“CAI Letter”); Fidelity Letter, supra note 16, at 5–6; SIFMA April Letter, 

supra note 16, at 9.  These commenters also cited to comment letters that had been submitted in 

response to the T+2 Proposing Release in support of retaining the Insurance Products Exemption 

Order. 



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commenter said it was not aware of any material change of circumstances that would warrant a 

change.128  Another commenter observed that the same administrative processes and regulatory 

requirements under state and Federal law that warranted the insurance products exemption were 

even more relevant for T+1 since insurance products have only grown more complex since the 

industry transitioned to T+2 in 2017.129 

C. Final Rule and Discussion 

1. Amendment to Exchange Act Rule 15c6-1(a) 

The Commission is amending paragraph (a) of Exchange Act Rule 15c6-1 as proposed.  

Rule 15c6-1(a) will prohibit broker-dealers from effecting or entering into a contract for the 

purchase or sale of a security (other than an exempted security, a government security, a municipal 

security, commercial paper, bankers’ acceptances, or commercial bills) 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. Subject to the 

exceptions enumerated in paragraphs (a) and (b) of the rule, the prohibition in paragraph (a) of 

Rule 15c6-1 applies to all securities.  However, as discussed in Part II.C.3 below, the Commission 

is amending paragraph (b) of Rule 15c6-1 to exclude security-based swaps from the requirements 

under paragraphs (a) and (c) of the rule. 

                                                 
128 See SIFMA April Letter, supra note 16, at 9 (stating that “in addition to retaining the 

exemptions, SIFMA recommends that the exemptions either be codified in Rule 15c6-1(b), or that 

the Commission issue a new order to replace the orders issued in 1995 to facilitate access to the 

terms of the exemptions and to facilitate compliance with their terms”).  This statement appears to 

collectively reference the exemption for insurance products, as well as the exemption for securities 

that do not have facilities for transfer and delivery in the U.S., both of which were issued in 1995. 

129  See Fidelity Letter, supra note 16, at 6. 



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The Commission’s reasons for amending Rule 15c6-1(a) to shorten the standard settlement 

cycle to T+1 are consistent with those articulated in the T+1 Proposing Release,130 and many of the 

comment letters submitted in response to that release.  First, the Commission continues to believe 

that shortening the standard settlement cycle to T+1 would result in a reduction in the number and 

total value of unsettled trades that exist at any point in time.  Assuming that trading volume 

remains constant, shortening the standard settlement cycle to T+1 should also decrease the total 

market value of all unsettled trades in the U.S. clearance and settlement system.  This reduction in 

the number and total value of unsettled securities transactions should result in a reduction in 

market participants’ overall exposure to market risk that arises from such transactions. 

 As explained in the T+1 Proposing Release, the Commission believes that shortening the 

standard settlement cycle to T+1 should also reduce CCP exposure to credit, market, and liquidity 

risk arising from its obligations to its participants, promoting the stability of the CCP and thereby 

reducing the potential for systemic risk to transmit through the financial system.131  Reducing these 

risks to the CCP would enable the CCP to reduce the overall size of the financial resources that the 

CCP requires of its participants, lowering costs to the CCP’s participants, and potentially their 

customers (i.e., other market participants and investors).  

As further explained in the T+1 Proposing Release, in periods of market stress, liquidity 

demands imposed by the CCP on its participants, such as in the form of intraday margin calls, can 

produce procyclical effects that reduce overall market liquidity.132  The T+1 Proposing Release 

                                                 
130  See T+1 Proposing Release, supra note 2, at 10447–49. 

131        See id. at 10448. 

132  See id. 



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further stated that reducing the CCP’s liquidity exposure by shortening the settlement cycle can 

help limit this potential for procyclicality, enhancing the ability of the CCP to serve as a source of 

stability and efficiency in the national clearance and settlement system.133  

Shortening the standard settlement cycle to T+1 also would enable investors to access the 

proceeds of their securities transactions sooner than they are able to in the current T+2 

environment.  Specifically, in a T+1 environment, sellers would have access to cash proceeds one 

day sooner and buyers would see purchased securities in their accounts one day earlier relative to a 

T+2 standard settlement cycle.   

Finally, market participants have already taken significant steps toward identifying the 

industry requirements and timelines for moving to T+1, and have made substantial progress in 

terms of planning such a move.134  Due to these efforts, the Commission believes that a successful 

move to T+1 settlement can occur by the compliance date,135 and the Commission believes that 

delaying such a move would allow undue risk to continue to exist in the U.S. clearance and 

settlement system.  

In response to the comment letters focusing on the challenges and costs associated with the 

prospective misalignment of securities settlement cycles that may follow a move to T+1 in the 

                                                 
133  See id. 

134  See, e.g., Deloitte, DTCC, ICI, and SIFMA, T+1 Securities Settlement Industry 

Implementation Playbook (Aug. 2022, updated Dec. 2022) (“T+1 Playbook”), 

https://www.dtcc.com/ust1/industry-playbook.  Additional information and documentation related 

to the industry’s ongoing planning related to the prospective move to a T+1 settlement cycle is also 

publicly available at https://www.dtcc.com/ust1/industry-playbook. 

135  See infra Part VII.A (discussing the compliance date of May 28, 2024, for the amendments 

to Exchange Act Rule 15c6-1(a)). 

https://www.dtcc.com/ust1/industry-playbook
https://www.dtcc.com/ust1/industry-playbook


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U.S.,136 the Commission agrees that such misalignment will likely present some challenges that 

may increase costs for certain market participants, including asset managers.  For example, the 

Commission recognizes that financing U.S. market transactions that settle on T+1 with the 

proceeds of an FX transaction that settles on T+2 may become more difficult, and therefore more 

costly, than financing of T+2 transactions is today.  However, market participants can modify their 

existing business practices in ways that allow their securities transactions in the U.S. to settle on 

T+1.137   

For example, market participants may extend the closing time for their FX trading desks, or 

they may pre-fund certain T+1 transactions that would otherwise be funded by an FX transaction 

that is executed on the same day as the securities transaction in the U.S.  In addition, as one 

commenter stated, asset managers may, in some cases, redeem money market positions, or rely on 

other financial resources, to meet their financing needs.138  While the Commission acknowledges 

that undertaking any of the three adjustments described here may increase certain costs for some 

market participants, shortening the standard settlement cycle to T+1 will reduce other costs (e.g., 

                                                 
136  See MarketAxess Letter, supra note 29, at 1–2; ICI Letter, supra note 16, at 4; Ballie 

Gifford Letter, supra note 50, at 1–2. 

137  The Commission observes that settlement cycles vary across asset classes.  For example, 

transactions in U.S. Treasury securities currently settle on a T+1 basis, and market participants use 

the proceeds of FX transactions to fund transactions in U.S. Treasury securities despite 

mismatched settlement cycles.  See infra note 618 (discussing the same, as well as other 

examples). 

138  AIMA Letter, supra note 29, at 5–6.   



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margin charges), increase capital efficiency, and reduce risk in the U.S. clearance and settlement 

system.139 

With respect to the suggestion of one commenter that the “appropriate market authorities” 

mandate a change in “the official equity trading day” for U.S. markets to close one hour earlier, at 

3:00 p.m. rather than 4:00 p.m. ET, to provide firms with more time to match trades and ensure the 

“settlement FX” is in place for the following day,140 the Commission believes that such a change is 

not necessary for a successful transition to T+1 to occur, and is otherwise not justified.  As 

explained in the paragraph immediately above, the Commission believes that market participants 

will be able to adjust their business practices to address the challenges associated with the 

misalignment of the T+1 settlement cycle for securities in the U.S. markets with the T+2 

settlement cycle for FX transactions.  In addition, the Commission believes that the commenter’s 

recommendation to shorten the length of the trading day in the U.S. equity markets specifically to 

address the commenter’s concern about FX transactions could have a negative impact on the 

trading activity and operations of market participants.  In particular, the Commission believes that 

modifying the length of the trading day would alter the existing operations of the U.S. securities 

markets prior to market close in a way that is disproportionate to the impact of the Commission’s 

proposal on the ability of market participants to use FX transactions to finance securities 

                                                 
139  See infra Part VIII.C.1 (discussing the anticipated benefits of shortening the standard 

settlement cycle to T+1). 

140  See Ballie Gifford Letter, supra note 50, at 2.Conformed to Federal Register version 

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transactions in the U.S markets because market participants will be able to adjust their business 

practices to address the challenges.141 

With respect to the commenter’s suggestion that the Commission “could allow for a 

mismatch of FX settlement dates as a valid reason for T+2 settlement arrangements without [such 

arrangements] breaching an investment adviser’s best execution obligation,”142 as explained above, 

the Commission believes that market participants will be able to adjust their business practices to 

address the challenges associated with the prospective mismatch between the settlement cycles for 

FX trades and the settlement cycle for securities transactions in the U.S. markets.  Even if a 

mismatch between the settlement time for FX transactions and a T+1 standard settlement cycle for 

U.S. securities transactions raises the cost of funding some transactions, as discussed previously, 

the Commission also believes that shortening the standard settlement cycle to T+1 will reduce 

other costs (e.g., margin charges), increase capital efficiency, and reduce risk in the U.S. clearance 

and settlement system.143  Additionally, while the commenter correctly states that the 

Commission’s proposal would allow parties to extend settlement only if they reach agreement at 

the time of the transaction, the commenter does not explain its understanding that “this would be 

difficult to implement in the context of trades that require the settlement of FX transactions to 

occur,” or that “for this reason a standing option to settle at T+2 would be more effective.”144  To 

                                                 
141  See infra notes 617–619 and accompanying text (further discussing the anticipated 

economic effects resulting from mismatched settlement cycles). 

142  See Ballie Gifford Letter, supra note 50, at 2. 

143  See supra note 139 and accompanying text (further discussing the other costs that would be 

reduced, as well as the increase in capital efficiency, and the reduction in risk to the U.S. clearance 

and settlement system). 

144  See Ballie Gifford Letter, supra note 50, at 2. 



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the extent the commenter is recommending that the Commission establish a separate T+2 

settlement cycle for transactions that are funded using FX transactions, such an approach is not 

workable because the counterparties to such transactions generally would not know whether the 

transaction had been funded in this way—unless the parties agreed to disclose in advance of the 

transaction the source of funding—and therefore also would not know whether to expect their 

securities transaction to settle on T+1 or T+2. 

The Commission has also considered the arguments submitted by one commenter that any 

misalignment of settlement cycles that follows a move to T+1 in the U.S. would increase the 

number of fails in connection with cross-border transactions and may force broker-dealers to 

decrease or cease offering cross-border services to their clients, and ultimately will reduce liquidity 

for U.S. investors.145  The commenter also specifically stated its expectation that there will be a 

significant number of settlement fails when a U.S. market participant is buying bonds and a “cross-

border participant” is unable to deliver the bonds until T+2.146  The Commission disagrees with 

each of the commenter’s statements for the reasons explained below. 

The Commission does not believe that the prospective misalignment of settlement cycles 

resulting from a move to T+1 will increase the number settlement fails connected with cross- 

border transactions.147  While settlement fails can occur for many different reasons, market 

participants will have many months to continue their planning and preparation for the move to 

                                                 
145  See MarketAxess Letter, supra note 29, at 1. 

146  Id.   

147  See infra notes 617–619 and accompanying text (further discussing the anticipated 

economic effects resulting from mismatched settlement cycles). 



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T+1.  By the time the transition to T+1 occurs, market participants will have had ample 

opportunity to analyze whether any given transaction presents an unacceptable risk of a settlement 

fail, and, as stated above,148 have options for adjusting their business practices to account for the 

challenges associated with settlement of certain transactions in a T+1 environment, such as FX 

transactions or other transactions with cross-border considerations.   

With respect to the commenter’s specific statement regarding the purchase of bonds by a 

U.S. market participant and the inability of a “cross-border participant” to deliver such bonds until 

T+2, the Commission acknowledges that in some cases it may be difficult for market participants 

to deliver bonds on T+1 when they seek to purchase the bonds in a foreign market and sell the 

same bonds in the U.S. market on the same day.  However, market participants will know the 

timing of their settlement obligations prior to entering into contracts to purchase bonds in a foreign 

market and sell them in the U.S. market.  If a market participant knows that the standard settlement 

cycle for the U.S. market transaction is shorter than the settlement cycle for the foreign market 

transaction, it may plan to either make arrangements to purchase or borrow the bonds sufficiently 

in advance of entering into the U.S. market transaction, or agree to a settlement date that is later 

than T+1 for the U.S. market transaction.  In cases where none of these options is viable, market 

participants may also decide not to enter into the U.S. market transaction rather than entering into a 

transaction that would predictably result in a settlement fail.  In the Commission’s view, these 

same options also may be available to market participants with respect to transactions in other 

types of securities and are not unique to bond market transactions.149 

                                                 
148  See supra note 138 and accompanying text. 

149  See infra notes 617–619 and accompanying text (further discussing the anticipated 

economic effects resulting from mismatched settlement cycles). 



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With respect to the commenter’s concerns regarding liquidity, even if moving to a T+1 

settlement cycle in the U.S. does increase the number of fails associated with certain securities 

transactions in the U.S. market, it does not necessarily follow that any prospective misalignment of 

settlement cycles would result in either increased fails in the U.S. market overall, or a reduction in 

the amount of liquidity available to U.S. investors.150  As explained above, the Commission 

expects that shortening the standard settlement cycle to T+1 will reduce risk in the clearance and 

settlement system by reducing the number of unsettled transactions that exist at any given point in 

time,151 and will result in increased overall liquidity in the U.S. markets.  That view is also 

consistent with many of the comment letters submitted in response to the T+1 Proposing 

Release.152 

With respect to the comment stressing the need for the Commission to work with 

international regulators to coordinate a move to T+1 settlement on a global basis if possible,153 the 

Commission and its staff intend to continue to work with regulators in other jurisdictions to ensure 

that the move to a T+1 settlement cycle in the U.S. is successfully implemented while minimizing 

any adverse impact the transition may have on market participants who engage in transactions in 

both the U.S. market and foreign markets.  However, the Commission believes that delaying the 

transition to T+1 in the U.S. until other jurisdictions have also committed to implementing T+1 is 

                                                 
150  See infra Part VIII.C.4 (further discussing the anticipated impact on settlement fails and 

liquidity). 

151  See supra note 130 and accompanying text. 

152  See supra notes 20, 22, and accompanying text. 

153  Id. 



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not necessary for a successful transition to T+1 to occur in the U.S.154  As a general matter, the 

Commission and Commission staff continue to engage with authorities in other jurisdictions 

regarding regulatory changes in the U.S., including to discuss differences between U.S. 

requirements and requirements in other jurisdictions, including through the Commission’s ongoing 

participation in the Financial Stability Board, the International Organization of Securities 

Commissions (“IOSCO”), and CPMI-IOSCO.155   

2. Response to Comments Relating to T+0 Settlement 

The Commission has carefully considered the comments it received relating to the 

prospective benefits and challenges associated with moving to a T+0 settlement cycle.  The 

Commission believes that shortening the settlement cycle further than T+1 could ultimately 

produce considerable additional benefits to investors compared with shortening the settlement 

cycle to T+1.  However, the Commission continues to believe that shortening the settlement cycle 

to T+0 would require the industry to develop solutions to the many challenges identified by market 

participants as impediments to such a move, as discussed at length in the T+1 Proposing 

                                                 
154  The Canadian Securities Authorities recently issued a proposal to transition the securities 

markets in Canada to T+1 to align with the T+1 standard settlement cycle adopted in this release.  

See Canadian Securities Administrators, Press Release, Canadian securities regulators outline steps 

to support transition to T+1, Dec. 15, 2022, https://www.securities-

administrators.ca/news/canadian-securities-regulators-outline-steps-to-support-transition-to-t1/.  

155  CPMI-IOSCO refers to the work undertaken jointly by IOSCO and the Committee on 

Payment and Market Infrastructures (“CPMI”) to enhance the international coordination of 

standard and policy development and implementation regarding clearing, settlement, and reporting 

arrangements, including with respect to financial market infrastructures such as central 

counterparties and central securities depositories. 

https://www.securities-administrators.ca/news/canadian-securities-regulators-outline-steps-to-support-transition-to-t1/
https://www.securities-administrators.ca/news/canadian-securities-regulators-outline-steps-to-support-transition-to-t1/


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Release,156 in the T+1 Report,157 and in several comment letters158 submitted in response to the 

T+1 Proposing Release.  Such impediments include, for example, challenges related to maintaining 

multi-lateral netting, institutional trade processing, securities lending practices, money settlement 

systems, mutual fund and ETF processing, transaction funding requirements, and corporate action 

processing.  Given the operational and technological challenges associated with moving to a T+0 

settlement cycle, the Commission believes that a successful move to T+0 would take longer to 

design and implement, and cost more than, a successful move to a T+1 settlement cycle.159 

Shortening the settlement cycle to T+1 will result in substantial benefits to market 

participants that will be attainable much sooner than shortening the settlement cycle to T+0.  Thus, 

the Commission believes shortening the settlement cycle to T+1 to be the more prudent and 

practical approach to shortening the settlement cycle at this time.   

However, the Commission continues to believe, as it stated in the T+1 Proposing Release, 

that the transition to a T+1 settlement cycle can be a useful step in identifying potential paths to 

T+0 settlement.160  As the securities industry moves forward to implement a T+1 standard 

settlement cycle, this process generally should include consideration of the potential paths to 

                                                 
156  See T+1 Proposing Release, supra note 2, at 10467–74. 

157  See T+1 Report, supra note 61, at 10–11. 

158  See supra notes 59–60, 62–71, and accompanying text. 

159  Because industry participants have not developed solutions to the technological, 

operational, and business challenges and impediments associated with a move to a T+0 settlement 

cycle, at this time the Commission cannot reasonably provide estimates regarding the length of 

time that would be necessary for a successful move to T+0, or the costs associated with such a 

move. 

160  See T+1 Proposing Release, supra note 2, at 10465. 



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achieving T+0 to help ensure that investments in new technology and operations undertaken to 

achieve T+1 can maximize the value of such investments over the long term.  Following the 

transition to T+1 in the U.S. markets, Commission staff will continue to work with industry 

leaders, public interest advocates, investors and other regulators to assess the future feasibility of a 

T+0 settlement standard cycle, and seek to identify ways to overcome the challenges associated 

with such a move, as articulated in the T+1 Proposing Release.161 

3. Amendments to Exchange Act Rule 15c6-1(b) 

The Commission is amending paragraph (b) of Exchange Act Rule 15c6-1 to exclude 

security-based swaps from the requirements under paragraph (a) of the rule.  The T+1 Proposing 

Release asked whether the Commission should provide exemptive relief from the requirements 

under Rule 15c6-1 for transactions in security-based swaps.162  As discussed above, the 

Commission received two comment letters that discussed whether Rule 15c6-1 should apply to 

security-based swap transactions and both of these commenters urged the Commission to exclude 

security-based swaps from the requirements under the rule.163  The Commission agrees with the 

comment letter highlighting “key differences” between security-based swaps and other types of 

securities, and agrees that such differences warrant excluding security-based swaps from the 

requirements under paragraph (a) of Rule 15c6-1.  In the Commission’s view, such characteristics 

of security-based swaps make transactions in security-based swaps inconsistent with the purpose, 

intent, and structure of Rule 15c6-1, as discussed further below. 

                                                 
161  Id. at 10467–75. 

162  See id. at 10451. 

163  See supra note 78 and accompanying text. 



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First, consistent with the Commission’s understanding of security-based swap transactions, 

the commenter explains that for security-based swaps “final net payment is paid by one party to 

the other at a future point in time to which the parties have contractually agreed.”164 The 

commenter also states that Rule 15c6-1 is “inapt” with respect to security-based swap transactions, 

which are “generally bilateral and executory in nature,” meaning that there are numerous terms 

that the parties typically agree to fulfill at later dates.165  The Commission believes that the 

commenter’s description of security-based swaps is accurate. 

The Commission further believes that excluding security-based swaps from the 

requirements under paragraph (a) of Rule 15c6-1 would be consistent with the purpose of the rule.  

The Commission first proposed Rule 15c6-1 to establish T+3 as “the standard settlement time 

frame for broker-dealer trades,”166 and explained in the T+3 Proposing Release that the rule “is 

designed to establish T+3 as a new ‘default’ contract term.”167  The T+3 Proposing Release further 

stated that most broker-dealers do not specify all of the terms of a trade before execution, but rely 

on industry custom and SRO rules for those terms, and the Commission did not intend to change 

industry custom to require broker-dealers to specify contract terms.168  Unlike other securities 

transactions, however, security-based swap contracts generally do include contract terms that 

specify the timing of contractual obligations, and for that reason there is not a need for any rule-

based “default” contract term that provides for the timing of such obligations.   

                                                 
164  SIFMA April Letter, supra note 16, at 11. 

165  Id. 

166  T+3 Proposing Release, supra note 4, at 11806–07. 

167  Id. at 11809. 

168  See id. 



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Because security-based swap contracts provide for the timing of contractual obligations, 

the Commission does not anticipate that it will become necessary for Rule 15c6-1(a) to apply to 

security-based swap transactions at any point in the future.  As such, the Commission is amending 

the text of Rule 15c6-1(b) to exclude security-based swaps from the requirements under Rule 

15c6-1(a), rather than issuing a new exemptive order that would accomplish the same objective. 

As discussed further in Part VII.B, the amendments to Rule 15c6-1(b) that the Commission 

is adopting in this document, including both the new provision that exempts security-based swaps 

from the scope of paragraph (a), as well as the technical conforming changes to Rule 15c6-1(b) 

described below, will become effective upon the effective date of the rule.  The Commission has 

determined that these changes should become effective upon the effective date, rather than the 

compliance date for Rule 15c6-1 more generally, to avoid any possible confusion as to whether 

broker-dealer transactions in security-based swaps may or may not be subject to Rule 15c6-1(a) 

between the effective date and the compliance date. 

As explained in the T+1 Proposing Release, Rule 15c6-1(b)(1) currently provides an 

exclusion for contracts involving the purchase or sale of limited partnership interests that are not 

listed on an exchange or for which quotations are not disseminated through an automated quotation 

system of a registered securities association.169  No commenters suggested amending the exclusion 

under existing Rule 15c6-1(b)(1), and the amendments to Rule 15c6-1(b) being adopted in this 

document do not include any changes to this exclusion. 

In recognition of the fact that the Commission may not have identified all situations or 

types of trades where the application of Rule 15c6-1(a) would be problematic, existing Rule 15c6-

1(b)(2) provides that the Commission may exempt by order additional types of trades from Rule 

                                                 
169  See T+1 Proposing Release, supra note 2, at 10446. 



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15c6-1(a), either unconditionally or on specified terms and conditions, if the Commission 

determines that such an exemption is consistent with the public interest and the protection of 

investors.170  No commenters suggested any amendments to paragraph (b)(2) of Rule 15c6-1, and 

the Commission is not amending this provision of the rule.  Accordingly, the Commission is 

making no substantive changes to the existing provision that is currently designated as paragraph 

(b)(2).  However, the amendments to Rule 15c6-1(b) being adopted in this document will 

redesignate existing paragraph (b)(2) of the rule as paragraph (b)(3) of the rule, and a new 

provision that excepts security-based swap transactions from the requirements under paragraph (a) 

of Rule 15c6-1 will be designated as paragraph (b)(2) of the rule.171   

The rule amendments being adopted in this document also strike the term “contracts” from 

the first clause in paragraph (b) of Rule 15c6-1, and add the words “Contracts for” to the beginning 

of paragraphs (b)(1) and (3) (formerly paragraph (b)(2)).  These technical changes are intended to 

account for the fact that the definition of a security-based swap under section 3(a)(68) of the 

Exchange Act172 incorporates the term “contract” and leaving the same term in the first clause of 

Rule 15c6-1(b) could create confusion as to the meaning of the new provision under paragraph 

(b)(2) of the rule, which refers to security-based swaps. 

4. Amendment to Exchange Act Rule 15c6-1(c) 

The Commission is amending paragraph (c) of Exchange Act Rule 15c6-1 to shorten the 

settlement cycle for firm commitment offerings for securities that are priced after 4:30 p.m. ET, 

unless otherwise expressly agreed to by the parties at the time of the transaction.  Specifically, the 

                                                 
170  See 17 CFR 240.15c6-1(b)(1). 

171  See 17 CFR 240.15c6-1(b)(1)–(3). 

172  See 15 U.S.C. 78c(a)(68). 



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amendment to paragraph (c) of Rule 15c6-1 will shorten the standard settlement cycle for these 

offerings from T+4 to T+2.  As amended, paragraph (c) of Rule 15c6-1 will provide that paragraph 

(a) of the rule does not apply to contracts for the sale for cash of securities that are priced after 

4:30 p.m. ET on the date such securities are priced and that are sold by an issuer to an underwriter 

pursuant to a firm commitment underwritten offering registered under the Securities Act or sold to 

an initial purchaser by a broker-dealer participating in such offering provided that a broker or 

dealer shall not effect or enter into a contract for the purchase or sale of such securities that 

provides for payment of funds and delivery of securities later than the second business day after 

the date of the contract, unless otherwise expressly agreed to by the parties at the time of the 

transaction.173 

As explained in the T+1 Proposing Release, in 1995 the Commission added paragraph (c) 

to Rule 15c6-1 in response to public comments stating that new issue securities could not settle on 

T+3 because prospectuses could not be printed prior to the trade date (the date on which the 

securities are priced).174  The T+1 Proposing Release proposed to delete paragraph (c) based on the 

Commission’s belief that expanded application of the “access equals delivery” standard for 

prospectus delivery supports removing paragraph (c) from Rule 15c6-1 because delays in the 

process that previously made delivery of the prospectus difficult to achieve under the standard 

settlement cycle have been mitigated by the “access equals delivery” standard.175  However, the 

T+1 Proposing Release also acknowledged that the T+1 Report had recommended the Commission 

                                                 
173  See 17 CFR 240.15c6-1(c). 

174  See T+1 Proposing Release, supra note 2, at 10449. 

175  See id. 



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retain paragraph (c), but modify it to shorten the standard settlement cycle for firm commitment 

offerings priced after 4:30 p.m. ET from T+4 to T+2.176  Additionally, the Commission requested 

public comment on the proposed deletion of paragraph (c) and requested that, to the extent that 

commenters agree with the T+1 Report, such commenters provide data or other detailed 

information explaining why a T+1 settlement cycle is an inappropriate standard for all firm 

commitment offerings priced after 4:30 p.m.177   

After reviewing the comment letters received in response to the T+1 Proposing Release, the 

Commission continues to believe that the process that made delivery of the prospectus difficult to 

achieve under the standard settlement cycle has been mitigated by the “access equals delivery” 

standard.  However, the Commission also is persuaded by the comment letter arguing that the 

Commission should retain paragraph (c) of Rule 15c6-1, but shorten the settlement cycle to T+2 

for firm commitment offerings for securities that are priced after 4:30 p.m. ET, unless otherwise 

expressly agreed to by the parties at the time of the transaction.178   

The Commission is persuaded that a T+1 settlement cycle is not long enough to prevent 

firm commitment offerings priced after 4:30 p.m. ET from failing to settle on time.  In particular, 

the Commission acknowledges that paragraphs (a) and (d) of Rule 15c6-1 would not allow parties 

to agree to a longer settlement cycle when circumstances unforeseen at the time of the pricing of 

                                                 
176  See id. (citing T+1 Report, supra note 61, at 33). 

177  See id. at 10450. 

178  See supra Part II.B.3 (providing a detailed description of comment letters urging the 

Commission to adopt a T+2 settlement cycle for firm commitment offerings for securities that are 

priced after 4:30 p.m. ET, unless otherwise expressly agreed to by the parties at the time of the 

transaction). 



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the transaction arise that prevent settlement on T+1.179  Specifically, while paragraphs (a) and (d) 

allow parties to agree to a longer settlement cycle, in order for the parties to avail themselves of 

that extended settlement date, they must reach that agreement at the time of the transaction and 

must take affirmative steps in advance of each such transaction in order to obtain relief under 

paragraph (a) or (d).  

With respect to unforeseen circumstances that arise in connection with firm commitment 

offerings, for example, as stated by a commenter, it is not unusual for unanticipated issues relating 

to transfer agents, legend removal, local law matters (including local court approval), medallion 

guarantees or non-U.S. parties to arise.180  Such unanticipated issues could lead to increased 

failures to settle trades on a T+1 basis with respect to firm commitment offerings priced after 4:30 

p.m. ET.  For these reasons, the Commission has reconsidered its proposed deletion of paragraph 

(c) of Rule 15c6-1. 

As stated above, the comment letter discussing the proposed deletion of paragraph (c) 

stated that the Commission should amend paragraph (c) to establish a T+2 settlement cycle for 

firm commitment offerings priced after 4:30 p.m. ET.181  The Commission agrees with the 

commenter’s recommendation, and is amending paragraph (c) to establish a T+2 settlement cycle 

for these offerings, rather than deleting paragraph (c) as the Commission proposed.  In the T+1 

                                                 
179  In the T+1 Proposing Release the Commission acknowledged that the complex 

documentation associated with firm commitment offerings may in some cases require more time to 

complete than is available under a T+1 standard settlement cycle.  See T+1 Proposing Release, 

supra note 2, at 10450–51.   

180  See SIFMA April Letter, supra note 16, at 10. 

181  See id. 



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Proposing Release, the Commission considered such a T+2 standard as an alternative to deleting 

paragraph (c), but proposed deleting paragraph (c) to fully harmonize the settlement of primary 

offerings with the settlement cycle for secondary market trades, thereby removing all financial and 

operational risks that can arise when the same security settles on two different settlement cycles.182  

In proposing this approach, the Commission stated its belief that paragraph (d) would provide 

sufficient flexibility to manage the need for a longer settlement cycle when it arises.183  In light of 

the comments received, and as discussed above, the Commission now believes that the flexibility 

provided by paragraph (d) is insufficient to ensure timely settlement for certain firm commitment 

offerings under a T+1 standard settlement cycle.  Accordingly, the Commission believes that the 

proposed alternative—retaining paragraph (c) but shortening the standard settlement cycle under 

the provision to T+2—would best achieve the Commission’s stated objective of establishing a 

common standard that effectively minimizes the financial and operational risks associated with the 

settlement of firm commitment offerings.  As discussed in the T+1 Proposing Release, the T+1 

Report indicates that, under the existing T+4 settlement cycle for firm commitment offerings, most 

transactions currently settle on a T+2 basis.  Consistent with the comments received, the 

Commission believes that a T+2 settlement cycle for firm commitment offerings priced after 4:30 

p.m. ET provides sufficient time and flexibility to complete documentation and address any other 

issues that may arise in the preparation of a firm commitment offering to ensure timely settlement.   

5. Retention of Existing Exchange Act Rule 15c6-1(d) Unchanged 

Because the Commission is not deleting paragraph (c) of Rule 15c6-1, the Commission is 

not adopting the proposed technical changes to paragraph (d) of the rule.  The Commission did not 

                                                 
182  T+1 Proposing Release, supra note 2, at 10450. 

183  Id. at 10492. 



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propose any other changes to paragraph (d) of Rule 15c6-1, and the Commission received no 

comments recommending changes to this provision of the rule. 

The Commission agrees with the commenter stating that paragraph (d) should be 

retained184 because paragraph (d) enables underwriters and the parties to a transaction to agree, in 

advance of the transaction, to a settlement cycle other than the standard settlement cycle specified 

in either paragraph (a) or (c) of the rule, when necessary to manage obligations associated with the 

firm commitment offerings.  Market participants involved in firm commitment offerings of certain 

debt and preferred securities commonly rely on paragraph (d) of Rule 15c6-1 to extend settlement 

in order to allow time for the completion of the extensive documentation associated with such 

offerings,185 and the Commission believes it is not always possible for such documentation to be 

completed within the time frames provided by under paragraphs (a) and (c) of Rule 15c6-1.  

Therefore the amendments to Rule 15c6-1 being adopted in this document do not include any 

changes to paragraph (d) of the rule.  

6. Exemptive Orders under Exchange Act Rule 15c6-1(b) 

The Commission has reviewed the comments submitted in response to the T+1 Proposing 

Release that relate to the Commission’s existing exemptive orders issued pursuant to Exchange 

Act Rule 15c6-1(b),186 and, because no changes are needed to facilitate an orderly transition to a 

T+1 settlement cycle, the existing exemptive orders will remain in effect without modification.   

The Commission’s view that no changes to the orders are needed is consistent with the comments 

                                                 
184  See SIFMA April Letter, supra note 16, at 11. 

185  See T+1 Report, supra note 61, at 33.  

186  See supra notes 105 and 126.    



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urging that the Commission retain both the existing exemption for certain insurance products, as 

well as the exemption for certain foreign securities, as described above.187   

With respect to the comments recommending that the Commission expand the scope of the 

existing exemptive order relating to securities that do not have facilities for transfer or delivery in 

the U.S.,188 the Commission is not persuaded that expanding the scope of the order is necessary at 

this time and is declining to do so for the reasons discussed below.  However, the Commission will 

continue to monitor how shortening the standard settlement cycle to T+1 in the U.S. affects market 

participants.   

Notwithstanding the comments raising concerns that the existing exemption for certain 

foreign securities does not exempt ADRs from the T+1 standard settlement cycle,189 the 

Commission believes that ADRs should continue to be subject to Rule 15c6-1(a).  In response to 

one commenter’s statements relating to the timely sale of ADR transactions using newly created 

ADRs,190 the Commission understands that a large percentage of ADR trading activity involves 

purchases and sales of existing ADRs in the U.S. markets.  Thus, the commenter’s concerns would 

seem to relate to only a small percentage of ADR trading activity.191   

                                                 
187  See supra Part II.B.5. 

188  See SIFMA April Letter, supra note 16, at 8–9; ICI Letter, supra note 16, at 4. 

189  See SIFMA April Letter, supra note 16, at 8; ICI Letter, supra note 16, at 4. 

190  See SIFMA April Letter, supra note 16, at 8. 

191  See infra notes 606–616 (discussing the anticipated economic effect on transactions in 

ADRs).  



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The commenter stated that “[t]his type of trade” will not be possible if the underlying 

foreign shares settle on T+2 and the related ADR is required to settle on T+1, and the result is 

likely to be wider bid-ask spreads for the ADR because market makers must take into account the 

additional cost of borrowing securities and other financing costs to avoid settlement failures.192  

While bid-ask spreads could widen and costs could increase for this narrow category of ADR 

transactions, the Commission believes that ADRs should be subject to the requirements under Rule 

15c6-1(a).  Exempting ADRs from the requirements under Rule 15c6-1(a) would create another 

misalignment between the securities settlement cycle for ADRs and the standard settlement cycle 

for other types of securities, which the Commission believes would unduly dilute the benefits of a 

standard settlement cycle.  As a general matter, a standard settlement cycle facilitates operational 

efficiency, reduces operational costs and transaction costs, and reduces risk for market participants.   

In this particular case, the Commission believes that exempting ADRs from Rule 15c6-1(a) 

would diminish the benefits associated with shortening the standard settlement cycle to T+1.  As 

previously discussed in detail, such benefits include risk reduction (e.g., credit, market, liquidity 

and systemic risk), as well as increased capital efficiency. 

The Commission also does not agree with the commenter that it will be impossible for 

market makers and other market participants to purchase foreign shares and sell related ADRs in 

the U.S. on the same trading day, and thus timely settle the sale of the ADRs using the newly 

created ADRs.193  Rather, the Commission believes that market participants can borrow the 

underlying securities necessary to settle the newly created ADR on T+1 if the securities are 

                                                 
192  See id.; see also ICI Letter, supra note 16, at 4. 

193  See SIFMA April Letter, supra note 16, at 8. 



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available.  While the commenter also raises the concern that in some cases it will not be possible to 

borrow the securities to make delivery,194 the possibility that certain securities may be costly or 

difficult to borrow at certain times is not limited to ADRs.  As previously discussed, establishing a 

standard settlement cycle facilitates operational efficiency, reduces operational costs and 

transaction costs, and reduces risk for market participants.  Providing exemptions for securities that 

can be costly or difficult to borrow—when the cost or difficulty to borrow will vary over time in 

response to movements in the price of the security, a dynamic unrelated to the length of the 

settlement cycle—would erode these benefits.  

The Commission also has reviewed the comments urging the Commission to “exempt from 

T+1 settlement” U.S.-listed ETFs with baskets that contain foreign securities and ADRs,195 and has 

determined that such an exemption is not warranted at this time for reasons that are similar to those 

discussed above in response to the comments raising concerns regarding the impact the move to 

T+1 will have on market participants trading ADRs.  As a general matter, the Commission believes 

that allowing ETFs to settle on a settlement cycle that is longer than T+1 would diminish the 

benefits associated with a standard settlement cycle and shortening the standard settlement cycle to 

T+1. 

The Commission recognizes that settling trades in U.S.-listed ETFs with baskets that 

contain foreign securities may become more costly for certain APs in a T+1 environment, as result 

of the prospective misalignment between the settlement cycle for such trades and the settlement 

cycle for the underlying foreign securities.  For example, the Commission acknowledges that 

during the ETF share creation process, APs may need to post collateral or establish credit lines to 

                                                 
194  See id. 

195  See id.; ICI Letter, supra note 16, at 4. 



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satisfy foreign market requirements.  However, as previously discussed, the Commission believes 

that moving to a T+1 settlement cycle will reduce other costs (e.g., margin charges), increase 

capital efficiency, and reduce risk in the U.S. clearance and settlement system.196 

The Commission also disagrees with the comment stating that the prospective 

misalignment in settlement cycles may increase certain risks, such as failed trades, accrual 

differences, net asset value miscalculations, and investment guideline breaches.  Market 

participants will have many months to implement any operational requirements they identify 

associated with the move to a T+1 settlement cycle, including the operational requirements 

associated with the settlement of U.S.-listed ETFs with baskets that include foreign securities 

and/or ADRs.  The industry has already identified many such requirements,197 and the Commission 

believes that market participants will have sufficient time to complete the operational changes 

necessary to minimize these risks.  Moreover, as explained above,198 the Commission believes that 

shortening the settlement cycle will reduce certain risks for market participants overall (e.g., credit, 

market and liquidity risk), including these risks faced by APs. 

The Commission also does not believe that it is necessary at this time to amend the text of 

paragraph (b) of Rule 15c6-1 to codify the existing exemptive order for securities that do not have 

facilities for transfer or delivery in the U.S., or the existing exemptive order for certain insurance 

products.  As noted above, one commenter recommended that the existing exemptions “either be 

                                                 
196  See supra note 139 and accompanying text. 

197  See T+1 Playbook, supra note 134, at 33 (providing recommendations to improve timing in 

nightly batch cycles, make use of lines of credit to address the potential need for more collateral, 

and establishing connections for real-time messaging with NSCC). 

198  See supra note 139 and accompanying text. 



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codified in Rule 15c6-1(b), or the Commission issue a new order to replace the orders issued in 

1995 to facilitate access to the terms of the exemptions and to facilitate compliance with their 

terms.”199   

Since these orders were first issued in 1995, both orders have provided adequate regulatory 

relief to market participants who engage in transactions that the orders were intended to cover.  

Codifying the exemptions is not necessary to facilitate the transition to a T+1 settlement cycle, and 

the Commission is aware of no evidence that market participants lack knowledge of the terms of 

the exemptive orders or have been unable to comply with the orders because they have not been 

codified in Rule 15c6-1. 

III. Exchange Act Rule 15c6-2 – Same-Day Affirmation 

A. Proposed Rule 15c6-2 

The Commission proposed Rule 15c6-2 to require that, where parties have agreed to 

engage in an allocation, confirmation, or affirmation process, a broker or dealer would be 

prohibited from effecting or entering into a contract for the purchase or sale of a security (other 

than an exempted security, a government security, a municipal security, commercial paper, 

bankers’ acceptances, or commercial bills) on behalf of a customer unless such broker or dealer 

has entered into a written agreement with the customer that requires the allocation, confirmation, 

affirmation, or any combination thereof, be completed as soon as technologically practicable and 

no later than the end of the day on trade date in such form as may be necessary to achieve 

settlement in compliance with Rule 15c6-1(a).200   

                                                 
199  See supra note 128 and accompanying text.  

200  See T+1 Proposing Release, supra note 2, at 10453.Conformed to Federal Register version 

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In proposing Rule 15c6-2, the Commission did not define the terms “allocation,” 

“confirmation,” or “affirmation,” but explained that trade allocation refers to the process by which 

an institutional investor (often an investment adviser) allocates a large trade among various client 

accounts or determines how to apportion securities trades ordered contemporaneously on behalf of 

multiple funds or non-fund clients.201  The T+1 Proposing Release also explained that the terms 

“confirmation” and “affirmation” in proposed Rule 15c6-2 refer to the transmission of messages 

among broker-dealers, institutional investors, and custodian banks to confirm the terms of a trade 

executed for an institutional investor, a process necessary to ensure the accuracy of the trade being 

settled.  The Commission stated its belief that these terms are widely used and generally 

understood by market participants who engage in institutional trade processing.202 

In addition, in proposing Rule 15c6-2, the Commission used the term “confirmation” to 

refer to the operational message that includes trade details provided by the broker-dealer to the 

customer to verify trade information so that a trade can be prepared for settlement on the timeline 

established in Rule 15c6-1(a), in contrast to the confirmations required under Rule 10b-10, which 

concern a series of disclosures that broker-dealers are required to provide in writing to customers 

at or before completion of a transaction.203  The Commission explained that the term 

“confirmation,” as used in proposed Rule 15c6-2, should be understood to refer to the institutional 

trade processing message or verification and not the disclosure required under Rule 10b-10.204 

                                                 
201  Id. 

202  See id. 

203  See id. at 10453–54. 

204  See id. at 10454. 



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The Commission also explained that the term “customer,” as used in proposed Rule 15c6-2, 

includes any person or agent of such person who opens a brokerage account at a broker-dealer to 

effect an institutional trade or purchases or sells a security for which the broker-dealer receives or 

will receive compensation.205  The Commission stated that the term is intended to cover both the 

institutional investor and any and all agents acting on its behalf.206 

B. Comments 

1. Existing Commercial Incentives for Timely Trade Allocations, 

Confirmations, and Affirmations 

Two commenters stated that the written agreements required under proposed Rule 15c6-2 

are unnecessary to improve same-day affirmation rates because commercial incentives to achieve 

timely trade allocations, confirmations, and affirmations already exist.207  One commenter 

identified, for example, the following incentives for firms to achieve on-time settlement: increased 

cost of settling a trade without netting through the CCP; increased costs associated with the 

processing of trades that are not affirmed; costs associated with buy-ins for trades that are not 

settled on a timely basis; and the potential for customer dissatisfaction related to the failure to 

timely settle or the increased costs associated with such failure.208  The second commenter stated 

                                                 
205  See id. 

206  See id. 

207  See Fidelity Letter, supra note 16, at 3–4 (stating that proposed Rule 15c6-2 is not 

necessary because “market incentives already exist to timely allocate, confirm, and affirm trades”); 

letter from Tom Price, Managing Director, SIFMA (Aug. 26, 2022), at 2 (“SIFMA August 26th 

Letter”) (stating that written agreements, as proposed by Rule 15c6-2, are unnecessary because 

“there are many commercial incentives in place for industry participants to meet market standard 

settlement timelines”).  

208  See SIFMA August 26th Letter, supra note 207, at 2.  



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that it is in an institutional customer’s best interest to timely allocate, confirm, and affirm its 

trades, as doing so is the first step and a pre-condition to settling a trade.209  This commenter also 

stated more generally that financial disincentives for institutional customers that do not meet a 

same-day affirmation timeline already exist.210   

2. Linking Settlement Instructions to Affirmation 

In the T+1 Proposing Release, the Commission stated that broker-dealers are best 

positioned to ensure the timely settlement of institutional trades and, as such, should be able to 

ensure via their customer agreements that institutional customers or their agents also adjust their 

operations to facilitate same-day affirmation.211  In response to this statement, one commenter 

stated that settlement requires client instruction through a client’s agents, who are typically 

custodians, against a broker-dealer’s trades.212  The commenter also stated that, because custodians 

often act as an agent for institutional clients, custodians are highly dependent on the 

implementation of efficient and timely operating models and processes across market participants 

at the trading level, including institutional clients and broker-dealers, before they can effect 

settlement on their client’s behalf.213  In this regard, the commenter requested that the Commission 

consider requiring through Rule 15c6-2 the linking of settlement instructions to the affirmation.214 

                                                 
209  See Fidelity Letter, supra note 16, at 3.  

210  See id. 

211  See T+1 Proposing Release, supra note 2, at 10453. 

212  See AGC April Letter, supra note 16, at 3.  

213  See id.  

214  See id. at 2.  



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3. Definitions of Certain Terms 

In the T+1 Proposing Release, the Commission requested comment as to whether the terms 

“allocation,” “confirmation,” “affirmation,” “end of the day on trade date,” and “customer” should 

be defined for purposes of Rule 15c6-2.215  In response, one commenter agreed with the 

Commission’s view, as articulated in the T+1 Proposing Release, and expressed support for not 

defining these terms in the rule.216  This commenter stated that, because operational and 

technological processes and practices continually evolve across market participants who engage in 

institutional trade processing, the above terms are best grounded in the prevailing market practices 

and uses understood by these market participants.217  A second commenter, in contrast, stated that 

it would generally be helpful for the Commission to provide definitions of terms within the context 

of the proposed rule, even where such terms are commonly used in the industry.218  The 

commenter recommended that the Commission define each of the above terms for purposes of 

Rule 15c6-2 and suggested that the Commission also define the term “trade” because there are 

multiple uses of this term by the industry.219  The commenter further stated that the term 

                                                 
215  See T+1 Proposing Release, supra note 2, at 10455.  

216  See letter from Matthew Stauffer, Managing Director and Head of DTCC Institutional 

Trade Processing, DTCC ITP LLC (Apr. 11, 2022), at 3 (“DTCC ITP April Letter”).  

217  See id. (explaining that by not prescribing definitions for the key terms used in proposed 

Rule 15c6-2, the Commission would allow such terms to continue to evolve).  

218  See letter from Jim Kaye, Americas Regional Director, FIX Trading Community (Apr. 11, 

2022), at 2–3 (“FIX Trading Letter”).  

219  See id.  The commenter provided suggested definitions for the terms “allocation,” 

“confirmation,” and “affirmation” and recommended that the term “end of the day on trade date” 

be defined as a specific time of day together with its time zone.  Id. at 2. 



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“affirmation” is open to some interpretation and suggested that the Commission define this term in 

particular.220   

4. Use of Third Parties to Achieve Same-Day Affirmation 

One commenter requested that the Commission clarify whether, under proposed Rule 15c6-

2, an investment adviser that has entered into an agreement with a broker-dealer pursuant to the 

proposed rule may rely on a third party—such as a third party order management system, sub-

adviser, or custodian—to allocate or affirm trades.221  This commenter, in a later letter, stated that 

“upon further analysis, we understand that requiring advisers to enter into specific contractual 

arrangements would create significant challenges for advisers,” and recommended that the 

Commission replace the proposed requirement of a written agreement with a requirement that 

investment advisers adopt and implement policies and procedures reasonably designed to ensure 

that allocations, confirmations, and affirmations are completed on a timeline that allows settlement 

on T+1.222  As the commenter explained, this approach would “relieve investment advisers, when 

they are parties to an allocation, confirmation, and affirmation process, from the burden of 

negotiating and having to regularly update written agreements,” and “create incentives for 

investment advisers to work with broker-dealers and other third parties to complete the process in a 

                                                 
220  See id. at 2. 

221  See IAA April Letter, supra note 16, at 3–4. 

222  See letter from Gail C. Bernstein, General Counsel, and William A. Nelson, Associate 

General Counsel, Investment Adviser Association (Oct. 19, 2022), at 1–2 (“IAA October Letter”). 



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timely manner while allowing them greater flexibility to comply in a manner best suited to their 

existing infrastructure, clients, and resource levels.”223   

5. Challenges Associated with Requiring Written Agreements in Support of 

Increasing Same-Day Affirmations 

Although commenters generally supported the Commission’s overall goal of increasing 

same-day affirmations, several commenters expressed a number of concerns with the written 

agreement requirement in proposed Rule 15c6-2.224  First, commenters stated that in many 

scenarios written agreements do not currently exist between the parties to an institutional 

transaction and would be highly burdensome to establish specifically for the purpose of facilitating 

same-day affirmation.  For example, two commenters explained that agreements do not exist 

because the parties engage in their transactions on a receive-versus-payment/deliver-versus-

payment (“RVP/DVP”) basis without an underlying agreement.225  In an RVP/DVP transaction, 

securities are only delivered by the seller when payment has been made by the buyer.     

Some commenters explained that where written agreements do not already exist, the parties 

would need to draft new agreements solely for the purpose of compliance with the rule.226  In this 

regard, commenters stated that, as proposed, Rule 15c6-2 would result in burdensome, time 

consuming, and costly contract negotiations, as broker-dealers would have to enter into a new or 

                                                 
223  Id. 

224  See ASA Letter, supra note 16, at 2; Fidelity Letter, supra note 16, at 3–4; IAA October 

Letter, supra note 222, at 1–3; ICI Letter, supra note 16, at 5–7; ISITC Letter, supra note 29, at 2; 

MarketAxess Letter, supra note 29, at 2–3; SIFMA April Letter, supra note 16, at 5–6; State Street 

Letter, supra note 16, at 4; Virtu Financial Letter, supra note 16, at 3. 

225  See Fidelity Letter, supra note 16, at 4; SIFMA April Letter, supra note 16, at 5. 

226  See ISITC Letter, supra note 29, at 2; Fidelity Letter, supra note 16, at 4.  



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amended written agreement with each of their institutional customers.227  Moreover, another 

commenter stated that certain clients may not authorize their investment advisers to enter into the 

type of written agreement required under proposed Rule 15c6-2, while other clients may insist on 

negotiating bespoke guideline requirements, such as arbitration or governing law, into their written 

agreements.228  Multiple commenters further expressed the view that the proposed written 

agreement requirement would create unnecessary practical burdens and costs.229  Several of these 

commenters stated that it would be impracticable for institutional customers to enter into such 

agreements because they often rely on other parties to complete certain elements of the allocation, 

confirmation, and affirmation process.230  One of these commenters stated more generally that a 

requirement for broker-dealers to enter into a written agreement with each of their institutional 

customers is not practically feasible.231  One commenter also observed that it is unclear under 

proposed Rule 15c6-2 whether broker-dealers should be entering into the written agreements with 

the investment advisers or with their customers.232  

                                                 
227  See ICI Letter, supra note 16, at 5–6; MarketAxess Letter, supra note 29, at 2–3; SIFMA 

April Letter, supra note 16, at 5–6. 

228  See SIFMA April Letter, supra note 16, at 5. 

229  See ASA Letter, supra note 16, at 2; ICI Letter, supra note 16, at 5; SIFMA April Letter, 

supra note 16, at 5; Virtu Financial Letter, supra note 16, at 3.  

230  See ICI Letter, supra note 16, at 5; SIFMA April Letter, supra note 16, at 5; Virtu Financial 

Letter, supra note 16, at 3. 

231  See ASA Letter, supra note 16, at 2. 

232  See SIFMA April Letter, supra note 16, at 5. 



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Multiple commenters expressed a separate concern that proposed Rule 15c6-2 would 

expose a non-breaching broker-dealer to potential liability if its customer, or customer’s agent, 

breaches the written agreement, even if through no fault of the broker-dealer.233  In raising this 

concern, some commenters stated that the proposed rule does not specify what should happen if 

the broker-dealer’s customer or its agent breaches the written agreement, which may put broker-

dealers in the difficult position of trying to regulate the conduct of their customers through 

commercial contracts.234  Another commenter also observed that the proposed rule would place the 

compliance burden on broker-dealers, even though the customer—and not the broker-dealer—has 

the necessary information to complete the allocation, confirmation, and affirmation process.235  

However, under proposed Rule 15c6-2, a broker-dealer is only responsible for its own actions and 

not for the actions of its customers or any other relevant parties to an institutional transaction, as 

discussed further in Part III.C.     

Further, several commenters expressed the view that a written agreement requirement, as 

proposed in Rule 15c6-2, would not be an effective approach for achieving the Commission’s 

                                                 
233  See Fidelity Letter, supra note 16, at 4; MarketAxess Letter, supra note 29, at 3; SIFMA 

April Letter, supra note 16, at 6; Virtu Financial Letter, supra note 16, at 3. 

234  See Fidelity Letter, supra note 16, at 4 (questioning whether, under proposed Rule 15c6-2, 

a broker-dealer would be subject to SEC enforcement if it failed to enforce private contractual 

provisions with its customers regarding same-day affirmation); MarketAxess Letter, supra note 29, 

at 3 (stating that broker-dealers are not regulators and, as such, cannot force their customers to 

upgrade their technology or processes to achieve same-day affirmations).  

235  See SIFMA April Letter, supra note 16, at 6.  



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overall goal of increasing same-day affirmations.236  One commenter observed, for example, that a 

written agreement requirement is unnecessary because the industry recognizes the importance of 

same-day affirmations and is actively working toward achieving same-day allocations, 

confirmations, and affirmations.237  In this regard, some commenters recommended that the 

Commission revise proposed Rule 15c6-2 to replace the written agreement requirement with a 

requirement that broker-dealers establish written policies and procedures reasonably designed to 

achieve same-day affirmation.238  Some of these commenters further stated that such a principles-

based approach would relieve the parties to an institutional transaction from the burden of 

negotiating a written agreement; incentivize broker-dealers to work with their customers to 

complete the allocation, confirmation, and affirmation process in a timely manner; and afford 

broker-dealers more flexibility to comply with the rule in a manner best suited to their specific 

business models, customer bases, and products.239 

Finally, two commenters indicated that the proposed requirement for written agreements in 

Rule 15c6-2 may encourage parties to cancel their transactions before the end of trade date when 

                                                 
236  See ASA Letter, supra note 16, at 2; ICI Letter, supra note 16, at 5; ISITC Letter, supra 

note 29, at 2; MarketAxess Letter, supra note 29, at 3; SIFMA April Letter, supra note 16, at 5; 

State Street Letter, supra note 16, at 4.  

237  See ICI Letter, supra note 16, at 7.  

238  See ASA Letter, supra note 16, at 2; ICI Letter, supra note 16, at 7; MarketAxess Letter, 

supra note 29, at 3; SIFMA April Letter, supra note 16, at 6; State Street Letter, supra note 16, at 

4; Virtu Financial Letter, supra note 16, at 3; see also IAA October Letter, supra note 222, at 1–2; 

SIFMA August 26th Letter, supra note 207, at 2.  

239  See ICI Letter, supra note 16, at 7; MarketAxess Letter, supra note 29, at 3; SIFMA April 

Letter, supra note 16, at 6; see also IAA October Letter, supra note 222, at 2–3; SIFMA August 

26th Letter, supra note 207, at 2. 



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an allocation, confirmation, or affirmation cannot be completed to avoid violating the proposed 

rule.240    

6. End-of-Day Trading, Transactions Across Multiple Time Zones, and 

Variations in Local Holidays as Obstacles to Same-Day Affirmation 

Several commenters raised concerns about certain obstacles—such as end-of-day trading, 

transactions across multiple time zones, and variations in holiday schedules—that could interfere 

with achieving same-day affirmation under proposed Rule 15c6-2.241  One commenter stated that, 

given time zone differences, a non-U.S. investment manager might not be able to fill and execute 

its U.S. securities transactions before its local close of business and, therefore, would not be able to 

achieve same-day affirmation.242  Another commenter indicated that same-day affirmation may be 

difficult to achieve for those in the same or similar time zones for trades occurring at or near the 

U.S. market close, and that same-day affirmation may not be feasible for those located in time 

zones several hours ahead of the U.S., as new cut-off times would occur late into their 

overnight.243  Some commenters stated that investment advisers and their clients often rely on 

other parties to complete certain aspects of the allocation, confirmation, and affirmation process 

and, in doing so, are subject to the time zones and local holiday schedules in the countries where 

                                                 
240  See ICI Letter, supra note 16, at 7; Virtu Financial Letter, supra note 16, at 3.  

241  See AIMA Letter, supra note 29, at 2, 6–7; ISITC Letter, supra note 29, at 6; SIFMA April 

Letter, supra note 16, at 5; Virtu Financial Letter, supra note 16, at 3.  

242  See ISITC Letter, supra note 29, at 6.  

243  See AIMA Letter, supra note 29, at 2, 6–7.  



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these other parties operate, which could prevent achieving same-day affirmation.244  The same 

commenters requested that the Commission modify proposed Rule 15c6-2 to offer broker-dealers 

some flexibility in situations where same-day affirmation cannot be achieved because of 

circumstances that are beyond their control.245  In this regard, some commenters recommended that 

the Commission replace the written agreement requirement in proposed Rule 15c6-2 with a 

requirement that broker-dealers adopt written policies and procedures to facilitate same-day 

affirmation.246   

7. Alternative Rule Recommended in SIFMA August Letter 

The Commission received an additional comment letter from SIFMA addressing 

alternatives to proposed Rule 15c6-2.247  SIFMA recommended that the Commission revise 

proposed Rule 15c6-2 to replace the written agreement requirement with a requirement for policies 

and procedures to support faster processing, as it would allow individual firms to design policies 

and procedures tailored to their business models, products, and unique customer bases while 

advancing the Commission’s interest in same-day affirmation.248  The Commission generally 

agrees that requiring broker-dealers to establish, maintain, and enforce policies and procedures for 

                                                 
244  See ICI Letter, supra note 16, at 5–6; SIFMA April Letter, supra note 16, at 5; Virtu 

Financial Letter, supra note 16, at 3. 

245  See ICI Letter, supra note 16, at 7; SIFMA April Letter, supra note 16, at 5; Virtu Financial 

Letter, supra note 16, at 3. 

246  See ICI Letter, supra note 16, at 7; SIFMA April Letter, supra note 16, at 5; Virtu Financial 

Letter, supra note 16, at 3. 

247  See SIFMA August 26th Letter, supra note 207, at 2–3.  

248  See id. at 2.  In Part III.B.5 above, the Commission has previously discussed why it 

believes it appropriate to retain the written agreement requirement in the rule, while also adding an 

option to establish, maintain, and enforce written policies and procedures.  



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achieving same-day affirmation is an effective way to improve affirmation rates because it 

promotes an orderly settlement process, thereby helping to ensure timely settlement in a shortened 

settlement cycle.  The Commission also believes that establishing, maintaining, and enforcing 

policies and procedures as an alternative approach to compliance aside from entering into written 

agreements enables broker-dealers to avoid the substantial burdens and challenges that may be 

associated with negotiating written agreements in some cases.  Nonetheless, as previously 

discussed in Part III.B.5 above, the Commission also believes that it is appropriate to retain the 

requirement for written agreements as one of two options for broker-dealers to achieve compliance 

with Rule 15c6-2. 

SIFMA’s recommendation included a number of elements.  First, SIFMA requested that 

Rule 15c6-2 be revised to require broker-dealers to establish, document, and uphold policies and 

procedures reasonably designed to maintain timely settlement rates.249  Second, SIFMA 

recommended that such policies and procedures: (i) address the timing of allocations, 

confirmations, and affirmations to ensure timely settlement; (ii) include a communication plan 

with market participants; (iii) provide a description of a broker-dealer’s ability to monitor 

compliance; (iv) include the development of controls and supervisory procedures; and (v) include 

the development of metrics to measure compliance.250  The Commission generally agrees with 

SIFMA’s approach and, as discussed in Part III.C below, is revising final Rule 15c6-2 to allow 

broker-dealers to achieve compliance with the rule either by (1) entering into written agreements 

or (2) establishing, maintaining, and enforcing reasonably designed policies and procedures.  

Below, the Commission discusses each of SIFMA’s recommendations in turn. 

                                                 
249  See id. 

250  See id. at 2–3.  



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First, SIFMA requested that Rule 15c6-2 be revised to require broker-dealers to establish, 

document, and uphold policies and procedures reasonably designed to maintain timely settlement 

rates.251  While the Commission agrees that a policies and procedures approach can also advance 

the Commission’s same-day affirmation objective, the Commission believes that timely settlement 

is a separate, if related, objective from same-day affirmation.  Commission rules have long 

established the standard for timely settlement, as reflected by the requirements for the standard 

settlement cycle set forth in Rule 15c6-1.  In contrast, Rule 15c6-2, as proposed, seeks to advance 

the objective of same-day affirmation.  As discussed further in Part III.C, the Commission believes 

that improving affirmation rates on trade date is an objective separate and apart from, if 

nonetheless related to, shortening the settlement cycle because it promotes an orderly settlement 

process regardless of the length of the settlement cycle.  In the T+1 Proposing Release, the 

Commission stated that, while proposed Rule 15c6-2 does not require settlement of the transaction 

on trade date, the requirement for same-day affirmation supports orderly settlement by reducing 

the likelihood of exceptions or other processing errors that can lead to settlement fails.252  The 

Commission recognizes that Rule 15c6-1 already addresses the concept of timely settlement by 

establishing a standard settlement cycle.  As a result, the Commission believes that, while 

proposed Rule 15c6-2 should be revised to incorporate a policies and procedures approach, the 

specific objective of same-day affirmation, and not the more general objective of timely 

settlement, remains the objective that such policies and procedures should be reasonably designed 

to achieve. 

                                                 
251  Id. at 2. 

252  See T+1 Proposing Release, supra note 2, at 10454–55.  



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Second, SIFMA suggested that policies and procedures be designed to address the timing 

of allocations, confirmations, and affirmations to ensure timely settlement.253  The Commission 

agrees that addressing the timing of allocations, confirmation, and affirmations on trade date can 

help advance the objective of same-day affirmation, and, as discussed further in Part III.C below, 

the Commission is including in the final rule a requirement for policies and procedures to include 

target time frames on trade date for achieving allocations, confirmations, and affirmations.254 

Third, SIFMA suggested that policies and procedures be designed to include a 

communication plan with market participants.255  The Commission agrees with this suggestion, 

and, as discussed further in Part III.C below, the Commission is including in the final rule a 

requirement for reasonably designed policies and procedures that include the procedures the 

broker-dealer will follow to ensure the prompt communication of trade information, investigate 

any discrepancies in trade information, and adjust trade information to help ensure that the 

allocation, confirmation, and affirmation process can be completed by the target time frames on 

trade date.256 

Finally, SIFMA suggested that the policies and procedures be designed to provide a 

description of a broker-dealer’s ability to monitor compliance, include the development of controls 

and supervisory procedures, and include the development of metrics to measure compliance.257  

The Commission also agrees that these elements can ensure that policies and procedures are 

                                                 
253  See SIFMA August 26th Letter, supra note 207, at 2.  

254  See Rule 15c6-2(b)(2). 

255  See SIFMA August 26th Letter, supra note 207, at 2. 

256  See Rule 15c6-2(b)(3). 

257  See id. at 2–3.  



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effective at helping to ensure that allocations, confirmations, and affirmations can be completed on 

trade date.  Accordingly, and as discussed further in Part III.C below, the Commission is including 

in the final rule similar requirements as those described by SIFMA for reasonably designed 

policies and procedures that identify and describe any technology systems, operations, and 

processes used to coordinate with relevant parties to ensure completion of the allocation, 

confirmation, or affirmation process;258 describe how the broker-dealer plans to identify and 

address delays;259 and measure, monitor, and document the rates of allocations, confirmations, and 

affirmations completed as soon as technologically practicable and no later than the end of trade 

date.260 

C. Final Rule and Discussion 

After considering the above comments, the Commission continues to believe that 

implementing a T+1 standard settlement cycle will require significant improvements in the current 

rates of same-day affirmations to help ensure timely settlement in a T+1 environment.261  Although 

the Commission agrees that the incentives identified by commenters in Part III.B.1 exist and help 

ensure timely settlement, the Commission believes that these incentives alone are insufficient to 

significantly improve same-day affirmation rates, as required to facilitate shortening the standard 

                                                 
258  See Rule 15c6-2(b)(1). 

259  See Rule 15c6-2(b)(4). 

260  See Rule 15c6-2(b)(5). 

261  See T+1 Proposing Release, supra note 2, at 10453.  



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settlement cycle to T+1.262  While data cited in the T+1 Proposing Release indicates that 

affirmation rates have improved over time, the improvements have been only modest.263  

Currently, despite existing commercial incentives and efforts to establish “same-day affirmation” 

as an industry best practice, only about 68% of trades achieve affirmation on trade date.264  

Because the above incentives and efforts, on their own, have not sufficiently improved the current 

rate of same-day affirmations, the Commission believes that additional regulatory steps—including 

establishing a Commission requirement designed to advance the same-day affirmation objective—

are needed.  In this way, a Commission rule effectively targeted to the same-day affirmation 

objective can increase the rate of same-day affirmation for several reasons.265   

First, in the absence of such a rule, the existing incentives identified by commenters tend 

only to impose substantial costs on the parties if a transaction fails to settle on time (i.e., pursuant 

to the standard settlement cycle set forth in Rule 15c6-1(a)).  However, failing to affirm by the end 

of trade date increases the likelihood that errors or exceptions will not be resolved in time for 

settlement.  The sooner the parties have affirmed the trade information for their transaction, the 

                                                 
262  See T+1 Report, supra note 61, at 13 (highlighting the need for achieving affirmation on 

trade date and encouraging that affirmations be completed by 9:00 p.m. ET on trade date to 

facilitate shortening the standard settlement cycle to T+1).  

263  T+1 Proposing Release, supra note 2, at 10453 n.156 (citing DTCC, Proposal to Launch a 

New Cost-Benefit Analysis on Shortening the Settlement Cycle (Dec. 2011), available at 

https://www.dtcc.com/en/news/2011/december/01/proposal-to-launch-a-new-costbenefit-analysis-

on-shortening-the-settlementcycle.aspx).  

264 See Sean McEntee, Executive Director, ITP Product Management, DTCC, Remarks at the 

DTCC ITP Forum – Americas (June 17, 2021) (“DTCC ITP Forum Remarks”), available at 

https://www.dtcc.com/events/archives. 

265  See infra notes 578–581 and accompanying text (discussing the anticipated economic 

benefits of Rule 15c6-2 for the rate of same-day affirmations). 

https://www.dtcc.com/en/news/2011/december/01/proposal-to-launch-a-new-costbenefit-analysis-on-shortening-the-settlementcycle.aspx
https://www.dtcc.com/en/news/2011/december/01/proposal-to-launch-a-new-costbenefit-analysis-on-shortening-the-settlementcycle.aspx
https://www.dtcc.com/events/archives


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lower the likelihood of a settlement fail because the parties will have more time to identify and 

resolve any potential errors.  Second, many institutional transactions are not eligible for netting 

through the CCP because the relevant securities are held by a custodian bank that is not a CCP 

participant, and so market participants that use such a custodian do not have the option for—or the 

accompanying incentive to complete allocations, confirmations, and affirmations by the 

submission times that would facilitate—netting at the CCP.266  While industry planning for T+1 

does contemplate creating new incentives to specifically induce same-day affirmations by certain 

cutoff times,267 even when the transaction will not be submitted to the CCP for netting, the 

associated costs for failing to meet such cutoff times are likely to be minor in comparison to the 

costs associated with a failure to settle the transaction.268  As a result, market participants may not 

take steps to realize the benefits that accrue from achieving allocations, confirmations, and 

                                                 
266  NSCC and DTCC ITP jointly offer an optional service called “ID Net” for transactions 

affirmed by DTCC ITP.  The service enables broker-dealers who are members of both NSCC and 

DTC to aggregate and net for delivery purposes their institutional transactions, affirmed via DTCC 

ITP, with their transactions pending for settlement in NSCC’s Continuous Net Settlement (“CNS”) 

system.  See DTCC, ID Net, https://www.dtcc.com/settlement-and-asset-services/settlement/id-net.  

Nevertheless, such affirmed transactions are not guaranteed by NSSC and NSCC does not provide 

any margin offset to the broker-dealers’ clearing fund requirements.  See Exchange Act Release 

No. 93070 (Sept. 20, 2021), 86 FR 53125 (Sept. 24, 2021) (SR-NSCC-2021-011) (approving 

NSCC rule change to remove ID Net transactions from required fund deposit calculations). 

267  See T+1 Report, supra note 61, at 13–14 (for a T+1 settlement cycle, encouraging 

allocations be complete by 7:00 p.m. ET on trade date and recommending a new affirmation cutoff 

time of 9:00 p.m. ET on trade date).  

268  Specifically, failing to submit allocation, confirmation, and affirmation data by the cutoff 

time will likely require a participant to submit the transaction manually to DTC, raising the cost of 

the transaction.  See infra note 269 and accompanying text (discussing the different fees that DTC 

applies depending on the timing or method of submission for settlement).  If, a market participant 

fails to settle the transaction, however, it may be subject to buy-in obligations, whereby the market 

participant may need to internalize not just the cost of completing the transaction manually but also 

the cost of replacing the trade to the extent that the market price of the transaction has moved 

against the market participant since trade execution. 

https://www.dtcc.com/settlement-and-asset-services/settlement/id-net


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affirmations on trade date, even when they are subjected to costs that arise from failing to achieve 

timely settlement.  Third, the costs associated with failing to affirm a transaction, or with failing to 

achieve a buy-in, can be shifted among the parties settling the transaction, reducing the likelihood 

that these incentives will induce the parties to identify potential improvements to their processes 

over time because they do not internalize the full costs of failing to complete the allocation, 

confirmation, and affirmation process on trade date.  In addition, because of the costs associated 

with improving processes and implementing new technologies, these incentives may only induce 

change when a broker-dealer is engaged in a high volume of transactions for which errors are 

recurring and is also internalizing the costs associated with correcting those errors.  Otherwise, a 

broker-dealer and the relevant parties may deploy “just in time” solutions, where the allocation, 

confirmation, and affirmation process is completed on settlement date or never completed, while 

shifting any higher costs associated with ensuring the timely settlement of the transaction to 

others.269     

In proposing a requirement for written agreements, the Commission intended for the 

relevant parties, through these agreements, to establish more thoughtful and orderly processes—

established prior to trade execution—so that the parties to the transaction and their agents would 

have a shared understanding as to what steps were necessary to ensure that allocations, 

confirmations, and affirmations could be completed across the range of transactions into which 

                                                 
269  See, e.g., DTCC, Guide to the 2023 DTC Fee Schedule, https://www.dtcc.com/-

/media/Files/Downloads/legal/fee-guides/DTC-Fee-Schedule.pdf (setting different prices for night 

deliver orders, day deliver orders, matched institutional trades, and exceptions processing). 

https://www.dtcc.com/-/media/Files/Downloads/legal/fee-guides/DTC-Fee-Schedule.pdf
https://www.dtcc.com/-/media/Files/Downloads/legal/fee-guides/DTC-Fee-Schedule.pdf


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they enter, and what consequences would result if a party (or its agent) failed to provide the 

necessary allocation, confirmation, or affirmation no later than the end of trade date.270   

In addition, the Commission believes that it is appropriate to impose obligations on a 

broker-dealer, even though the broker-dealer is only responsible for its own actions and not for the 

actions of others under Rule 15c6-2, because the broker-dealer has the ability, in some 

circumstances, to modify the conduct of the other relevant parties with which the broker-dealer 

may participate in the allocation, confirmation, and affirmation process to ensure its own 

compliance with the rule.  As a result, the Commission believes that imposing such obligations on 

broker-dealers can increase the rate of same-day affirmation for institutional transactions,271 

thereby promoting the timely and orderly settlement of securities transactions, because many 

broker-dealers will have relationships across multiple advisers, custodians, and other types of 

agents, and therefore can introduce better processes and procedures across a range of different 

relationships.  Although the broker-dealer ultimately may not be in a position to bind the behavior 

of others,272 the Commission believes that market participants are generally aligned in support of 

                                                 
270  To promote such preparation ex ante, the Commission has modified the final rule to enable 

broker-dealers to pursue a policies and procedures approach as an alternative to written 

agreements.  See infra Part III.C.2 (discussing the policies and procedures alternative). 

271  To measure progress on the same-day affirmation objective, the Commission is also 

adopting a requirement for CMSPs to submit to the Commission an annual report on straight-

through processing that is required to include data on the rate of allocations, confirmations, and 

affirmations, enabling the Commission to measure progress on these metrics over time.  See infra 

Part V.C.2.c) (discussing the data elements required in the annual report, which include data 

concerning allocations, confirmations, and affirmations). 

272  Nonetheless, brokers do design their fees, in part, to address the risks that they face, 

including settlement risk.  See infra notes 567–568 and accompanying text (explaining that broker-

dealers set their fees, in part, to manage settlement risks).  Broker-dealers may determine to raise 

the cost of trading for customers that do not facilitate same-day affirmation pursuant to a broker-

dealer’s written agreements or written policies and procedures, as applicable.  



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facilitating same-day allocations, confirmations, and affirmations for their transactions to the 

greatest extent possible.  The Commission believes that same-day affirmation is an important 

objective that can facilitate an orderly and efficient transition to a T+1 and shorter settlement 

cycles, and that Rule 15c6-2 will incentivize broker-dealers to identify and deploy effective 

practices for achieving allocations, confirmations, and affirmations ex ante, thereby improving the 

rate of allocations, confirmations, and affirmations over time.   

As explained in the T+1 Proposing Release, the compliance burden imposed on broker-

dealers by Rule 15c6-2 is to have a written agreement in place with its customers that requires that 

the allocation, confirmation, and affirmation process be completed as soon as technologically 

practicable and no later than the end of the day on trade date in such form as may be necessary to 

achieve settlement in compliance with Rule 15c6-1(a).273  In the Commission’s view, even a 

simple requirement to have an agreement in place can effectively promote same-day affirmation 

because it helps ensure that the parties to a transaction where allocation, confirmation, or 

affirmation will occur have agreed in advance of entering the transaction as to the operational 

arrangements necessary to ensure the allocation, confirmation, or affirmation of the transaction.  

Rule 15c6-2 would not expose a non-breaching broker-dealer to liability for violating the rule 

based on the actions of its customer, or customer’s agent, provided that the written agreement 

describes the obligations of the parties to ensure the allocation, confirmation, or affirmation of the 

transaction, and the broker-dealer itself has complied with its obligations under the written 

agreement.  The Commission understands that commercial relationships between broker-dealers 

and other parties, such as investment advisers, often describe and, when possible, quantify 

expectations between the parties as to the timing of and other circumstances affecting the transfer 

                                                 
273  See T+1 Proposing Release, supra note 2, at 10453.Conformed to Federal Register version 

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of securities and funds, establishing costs and other terms that may apply if one of the parties to the 

agreement fails to meet its obligations for a certain threshold of transactions within a certain 

timeframe.  Adding a contractual requirement for the same-day allocation, confirmation, and 

affirmation of institutional transactions that would be executed and settled as part of such 

commercial relationship, in the Commission’s view, is likely to increase the percentage of 

transactions for which allocations, confirmations, and affirmations are completed on trade date. 

As a general matter, the Commission acknowledges that some of the incentives identified 

by commenters may better align with the objective of same-day affirmation in a T+1 environment 

than in a T+2 environment because market participants are likely to endeavor to submit trades that 

are eligible for netting to the CCP for settlement during a new overnight process planned for the 

evening of trade date,274 a process that would be unavailable unless the parties complete trade 

allocations, confirmations, and affirmations on trade date.  As stated by some commenters, the 

final design of deadlines and related operational requirements at the CCP, and at the industry level 

more generally, will encourage market participants to improve the rate of allocations, 

confirmations, and affirmations completed on trade date, as will the shortening of the settlement 

cycle more generally.275  Nonetheless, the Commission believes that final Rule 15c6-2, modified 

as discussed further below, can help ensure that incentives with respect to allocations, 

confirmations, and affirmations are aligned with timely and orderly settlement, critical to ensuring 

that the rate of settlement fails remains low as the settlement cycle continues to shorten.276 

                                                 
274  See T+1 Report, supra note 61, at 13.  

275  See supra Part III.B.1 (discussing these comments). 

276  See infra note 272 (discussing the ability of broker-dealers to use their schedule of fees to 

impose costs on customers or agents thereof that prevent completion of the allocation, 

confirmation, and affirmation process on trade date). 



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On balance, the Commission believes that final Rule 15c6-2, with the modifications 

discussed below to address specific concerns raised by commenters, will increase the incentive to 

submit allocations, confirmations, and affirmations on trade date, discouraging “just in time” 

solutions that may jeopardize timely settlement in a T+1 environment.  In particular, the 

Commission believes that “just in time” solutions may increase the rate of settlement fails in a T+1 

environment because the parties to a transaction will have significantly less time to resolve issues 

that can prevent settlement, raising the possibility that errors associated with the allocation, 

confirmation, and affirmation process may delay timely settlement.  Improving the rate of same-

day affirmations thereby promotes an orderly and efficient settlement process.  More generally, as 

discussed in the T+1 Proposing Release, agreeing to trade information as close in time as is 

technologically practicable to trade execution helps ensure that any discrepancies in trade details 

are identified and resolved far enough in advance to ensure timely and orderly settlement.277  In 

this way, Rule 15c6-2 can promote an orderly and efficient process in a T+1 environment because 

it substantially increases incentives for market participants to complete the key task of agreeing to 

trade information, including the price of the transaction and quantity of shares to be transferred, on 

trade date. 

1. Modifications to Requirement for Written Agreements 

The Commission is adopting Rule 15c6-2 with several modifications.  First, with respect to 

the requirement to enter written agreements to ensure the completion of the allocation, 

confirmation, affirmation, or any combination thereof, for the transaction as soon as 

technologically practicable and no later than the end of the day on trade date in such form as 

necessary to achieve settlement of the transaction, the Commission is revising the rule to replace 

                                                 
277  See T+1 Proposing Release, supra note 2, at 10454–55.  



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references in the text to “customer” with “relevant parties” to better align the obligations under 

Rule 15c6-2 with the market dynamics that currently exist between broker-dealers, their 

customers, and their customers’ use of advisers, custodians, and other third party agents as they 

participate in post-trade processes, including the allocation, confirmation, and affirmation process.   

The Commission believes that this modification helps reduce the likelihood that broker-

dealers would need to enter into new agreements with their customers specifically for the purpose 

of ensuring the same-day affirmation of the transaction.  It also removes the need for a broker-

dealer to enter into an agreement with its customer specific to same-day affirmation if a third-

party, such as an adviser, custodian or other agent of its customer, would be the party to engage 

with the broker-dealer to ensure the allocation, confirmation, or affirmation of the transaction.  As 

discussed in the T+1 Proposing Release,278 the Commission intended for “customer” to include the 

relevant parties to a transaction that would participate in the allocation, confirmation, and 

affirmation process and would include the customer, the customer’s investment adviser, the 

customer’s custodian, or any other agent acting (directly or indirectly) on behalf of the customer.  

The modification helps ensure that, when a broker-dealer is considering whether and with which 

entities to enter into written agreements, the broker-dealer needs to identify only the relevant party 

or parties that will have a role or roles in completing the allocation, confirmation and affirmation 

process.  The Commission also believes that this modification helps ensure that Rule 15c6-2 is 

appropriately designed to impose a written agreement requirement where a written agreement is 

practical and can help ensure the same-day affirmation of a transaction, even if many broker-

dealers may ultimately choose to implement the rule through the policies and procedures 

alternative discussed in Part III.C.2. 

                                                 
278  See T+1 Proposing Release, supra note 2, at 10454; see also Part III.A.  



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The Commission’s understanding is that, even if such party is not the broker-dealer’s own 

customer, some broker-dealers may choose to enter into commercial agreements with such other 

relevant parties in order to support their customer relationships, collect fees, and otherwise 

facilitate the operational processes necessary to complete and settle the transaction.  Rule 15c6-2 

does not require, however, that a broker-dealer enter into written agreements with parties that do 

not have a role in the allocation, confirmation, and affirmation process.  For example, if a broker-

dealer is acting in the capacity of an executing broker on behalf of a customer and another broker-

dealer will take responsibility for completing the allocation, confirmation, and affirmation process 

with the relevant parties to settle the transaction (a “clearing broker” in this context), then the 

executing broker need only comply with the rule to the extent that it participates in the allocation, 

confirmation, and affirmation process.  An executing broker that does not participate in such 

processes would face no obligations under the rule.  If an executing broker does undertake certain 

obligations with respect to its customer, such as may be delineated in its commercial arrangements 

with the relevant clearing broker, then under Rule 15c6-2 such a broker-dealer generally should 

ensure that its arrangements with the clearing broker identify that the clearing broker will be the 

broker-dealer “engaging in the allocation, confirmation, and affirmation process” for compliance 

with Rule 15c6-2.  If the executing broker and the clearing broker do not have written agreements 

that establish the commercial relationship between them, then the executing broker generally 

should consider whether it needs to establish, implement, and maintain policies and procedures to 

identify and explain its role and its relationship with the clearing broker, consistent with Rule 

15c6-2(a)(2), discussed in Part III.C.2.  In contrast to an executing broker—which may not 

participate in the allocation, confirmation, and affirmation process—the clearing broker that 



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facilitates the settlement of the transaction, and thereby participates in the allocation, confirmation, 

and affirmation process, would need to comply with Rule 15c6-2. 

Second, the Commission is making other technical changes to the written agreements 

requirement to simplify the rule text and to accommodate the new alternative for broker-dealers to 

establish, maintain, and enforce written policies and procedures to ensure completion of the 

allocation, confirmation and affirmation as soon as technologically practicable and no later than 

the end of the day on trade date.279  The Commission is removing the prohibition language in the 

rule (i.e., “No broker or dealer . . . shall”) and replacing it with an affirmative obligation (i.e., “A 

broker or dealer shall”).   

In addition, the Commission has removed language that paralleled the language in Rule 

15c6-1 regarding the scope of affected securities under the rule (“a contract for the purchase or 

sale of a security (other than an exempted security, a government security, a municipal security, 

commercial paper, bankers’ acceptances, or commercial bills)”).  The Commission has replaced 

the proposed language with a cross reference to the rule (e.g., “a securities transaction that is 

subject to the requirements of § 240.15c6-1(a)”).  The purpose of this change is to simplify the rule 

text and ensure that the scope of transactions relevant to compliance with Rule 15c6-2 remains 

consistent with the scope of transactions under Rule 15c6-1(a).  The scope of transactions remains 

unchanged from the proposed rule, as discussed in the T+1 Proposing Release, and is the same 

scope of transactions as those covered by Rule 15c6-1(a) for which the broker-dealer will engage 

in the allocation, confirmation, or affirmation process with another party.280 

                                                 
279  See infra Part III.C.2 (discussing the policies and procedures alternative in Rule 15c6-

2(a)(2)). 

280  See T+1 Proposing Release, supra note 2, at 10453.  



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Finally, as discussed further in Part III.C.2, the Commission is modifying proposed Rule 

15c6-2 to provide two options by which broker-dealers may comply with the rule, as adopted.  The 

two options are set forth in new paragraphs (a)(1) and (2).  The first option, reflected in paragraph 

(a)(1), is the proposed requirement for written agreements, modified in the ways discussed above.  

The second option, reflected in paragraph (a)(2), provides an alternative to the written agreements 

requirement, where, in lieu of a written agreement, a broker-dealer may choose to establish, 

maintain, and enforce written policies and procedures reasonably designed to ensure the 

completion of the allocation, confirmation, affirmation, or any combination thereof, for the 

transaction as soon as technologically practicable and no later than the end of the day on trade date 

in such form as necessary to achieve settlement of the transaction. 

While the Commission believes that a policies and procedures approach can relieve the 

parties to an institutional transaction from the burden of negotiating a written agreement where one 

does not exist, the Commission believes that the written agreement requirement may be useful to 

those broker-dealers that have already established written agreements that govern the operational 

arrangements for certain commercial relationships.  Specifically, such broker-dealers that already 

have written agreements in place to manage their commercial relationships with their customers’ 

advisers, custodians or other agents may find it efficient to revise these written agreements to 

comply with Rule 15c6-2.  Even where written agreements do not currently exist, if the relevant 

parties are amenable to entering into a written agreement to manage their responsibilities under the 

allocation, confirmation, and affirmation process, a broker-dealer may find that such agreement is 

an effective tool for identifying the circumstances and operational arrangements that the relevant 

parties ought to negotiate and agree to ensure the same-day allocation, confirmation and 

affirmation of the transaction, in a similar way that developing policies and procedures would also 



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identify and describe the circumstances and operational arrangements for each relevant 

relationship that would be necessary to ensure the completion of allocations, confirmations and 

affirmations.   

Ultimately, the written agreement requirement is designed to achieve the same goals as the 

alternative policies and procedures requirement, and broker-dealers may elect to comply with the 

alternative that they believe is better suited to their existing operations, specific business model, 

customer base, securities offered for settlement, and commercial relationships.  In some cases, 

because written agreements would be individually tailored to a specific commercial relationship, 

they may help broker-dealers and the other relevant parties to an institutional transaction develop 

innovations that improve the allocation, confirmation, and affirmation process.  Nonetheless, as 

previously discussed, the Commission acknowledges that the costs and challenges of negotiating a 

written agreement with the relevant parties may lead broker-dealers to choose to implement the 

rule via the policies and procedures requirement. 

In addition, the Commission believes that replacing the term “customer” with “other 

relevant parties” and to add an option to establish, maintain, and enforce written policies and 

procedures reasonably designed to ensure the completion of allocations, confirmations, and 

affirmations addresses the comments regarding use of third parties discussed in Part III.B.4.281  

First, the modifications ensure that the requirements apply not to the broker-dealer and its 

customer but instead to the broker-dealer and the relevant parties that ensure the completion of the 

allocation, confirmation, and affirmation process.  Such parties may be the customer, the 

                                                 
281  Such policies and procedures would be required to include the elements described in Part 

III.C.3 below.   



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customer’s investment adviser, the customer’s custodian, or another agent acting directly or 

indirectly on behalf of the customer.282  Second, where the adviser is the relevant party with whom 

the broker-dealer will engage to complete the allocation, confirmation, or affirmation process, then 

the broker-dealer may seek either to establish a written agreement to ensure compliance with the 

rule, or the broker-dealer may instead choose to establish, maintain, and enforce policies and 

procedures under the rule.  In the latter case, the broker-dealer may still seek to establish 

arrangements with the relevant parties to achieve compliance with the rule.283  

2. New Policies and Procedures Alternative to Written Agreements 

Requirement 

As previously discussed, the Commission is modifying proposed Rule 15c6-2 to enable a 

broker-dealer either to (1) enter into written agreements or (2) establish, maintain, and enforce 

reasonably designed written policies and procedures to ensure completion of the allocation, 

confirmation, affirmation, or any combination thereof, for a transaction as soon as technologically 

practicable and no later than the end of the day on trade date, in such form as necessary to achieve 

settlement.  The Commission is providing broker-dealers with this discretion under the rule to 

allow broker-dealers to select the approach that best aligns with their existing business practices 

                                                 
282  See supra notes 205–206 and accompanying text (describing the same). 

283  For example, consistent with the requirements of Rules 15c6-2(b)(3) and (4), as discussed 

further in Part III.C.3, policies and procedures would be required to, under paragraph (b)(3) 

describe the procedures that the broker or dealer will follow to ensure the prompt communication 

of trade information, investigate any discrepancies in trade information, and adjust trade 

information to help ensure that the allocation, confirmation, and affirmation can be completed by 

the target time frames on trade date, and, under paragraph (b)(4), describe how the broker or dealer 

plans to identify and address delays if another party (such as an investment adviser or a custodian) 

is not promptly completing the allocation or affirmation for the transaction, or if the broker or 

dealer experiences delays in promptly completing the confirmation.  It may be useful for broker-

dealers to engage with the relevant parties to the allocation, confirmation, and affirmation process 

regarding the nature of these communications. 



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and customer relationships, and to consider the approach that best enables the broker-dealer to 

ensure the completion of allocations, confirmations, and affirmations as soon as technologically 

practicable and no later than the end of the trade date.   

In response to the concerns raised by commenters in Part III.B.5, the Commission generally 

agrees that requiring policies and procedures as an alternative approach to compliance, separate 

from entering into written agreements, provides broker-dealers with more flexibility to achieve 

same-day affirmation.  As a general matter, the Commission believes that the policies and 

procedures alternative in Rule 15c6-2 can help ensure that, when the parties to a transaction 

encounter obstacles that may prevent them from completing an allocation, confirmation, or 

affirmation on trade date, they have policies and procedures to navigate, address, and when 

possible mitigate or overcome such obstacles.284  The Commission also acknowledges that, in 

cases where written agreements do not already exist, a requirement to enter into such agreements 

specifically to achieve same-day affirmations may create substantial burdens and challenges.  Such 

challenges may include, for example, a client who chooses not to authorize its investment adviser 

to enter into such agreement or circumstances where multiple third parties are relied upon to 

complete elements of the allocation, confirmation, and affirmation process.  Similarly, in the 

context of RVP/DVP transactions discussed in Part III.B.5, while some broker-dealers that 

regularly engage in RVP/DVP transactions may choose to enter into commercial agreements with 

their counterparties or agents of their counterparties to help facilitate this process, not all do and 

                                                 
284  For example, reasonably designed policies and procedures generally could include robust 

compliance and monitoring systems; processes to escalate identified instances of noncompliance 

for remediation; procedures that designate responsibility to business line personnel for supervision 

of functions and persons; processes for escalating issues; processes for periodic review and testing 

of the adequacy and effectiveness of policies and procedures; and training on policies and 

procedures.  The Commission discusses the specific elements required of reasonably designed 

written policies and procedures under Rule 15c6-2(b) in Part III.C.3. 



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may instead rely on a combination of best practices, relationship management, and the obligations 

imposed by Commission or SRO rules as a substitute for a formal written agreement among the 

parties necessary to ensure the allocation, confirmation, and affirmation of the transaction.  For 

those broker-dealers who do choose to enter into such agreements, the requirement for written 

agreements can be an effective and efficient mechanism for advancing the same-day affirmation 

requirement because it enables them to leverage their existing operational arrangements already 

established under the written agreements to codify the steps that the parties will take to ensure the 

same-day affirmation of transactions executed pursuant to the agreement.  Nonetheless, the 

Commission also believes that an alternative policies and procedures requirement will help relieve 

broker-dealers of the burdens and challenges that, in some cases, may arise if broker-dealers are 

required to enter into new written agreements specifically for the purpose of facilitating same-day 

affirmation.285  The Commission recognizes that, in response to this modification, and due to the 

costs and challenges of entering into written agreements identified by commenters generally, 

nearly all broker-dealers that do not already have written agreements may choose to implement the 

rule through the policies and procedures requirement rather than the written agreement 

requirement.286 

Regardless of the alternative chosen, the Commission recognizes that same-day affirmation 

still may not be achievable in all circumstances due to particular obstacles associated with the 

transaction, including the time of the transaction, the time zone in which a party to the transaction 

                                                 
285  See supra Part III.B.1 and infra Part III.B.7.  

286  For purposes of estimating the Paperwork Reduction Act (“PRA”) burdens under Rule 

15c6-2, the Commission has assumed that all respondent broker-dealers will implement the rule 

through the policies and procedures requirement.  See infra Part IX.C. 



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resides, and/or variations in local holidays.287  The difficulty associated with achieving a same-day 

affirmation will necessarily vary depending on the types of transactions entered, the locations of 

the parties, and the sophistication of their operational arrangements.  The Commission also 

generally agrees with commenters that requiring policies and procedures as an alternative approach 

to compliance, separate from entering into written agreements, provides broker-dealers with more 

flexibility to achieve same-day affirmation while also avoiding the substantial burdens and 

challenges that, in some cases, may result from having to enter into written agreements specifically 

to address the same-day affirmation objective.   

Whatever approach the broker-dealer determines is most appropriate for its circumstances 

and set of relationships, the Commission believes that either written agreements or policies and 

procedures can be structured to address challenges associated with the timing considerations raised 

by the commenters.  Where commercial relationships exist, for example, the parties retain the 

ability to specify in their written agreements what steps are appropriate to ensure that allocations, 

confirmations, and affirmations can be completed on trade date.  They can choose to specify how 

to accelerate the process to accommodate end of day trading, as well as how to staff their 

operations to ensure that the parties are available to complete allocations, confirmations, and 

affirmations across multiple time zones and, when needed, to plan for and accommodate local 

holidays.  In some cases, depending on the business model and scope of relationships that a 

broker-dealer employs to complete allocations, confirmations, and affirmations, establishing, 

maintaining, and enforcing written policies and procedures may be a more effective tool for 

navigating the challenges that may occur for some end-of-day transactions and transactions across 

multiple jurisdictions.  For example, to be reasonably designed, policies and procedures generally 

                                                 
287  See supra Part III.B.6 (discussing comments expressing concerns about these obstacles). 



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should address the steps that would be taken in response to known obstacles to same-day 

affirmation, such as when transactions are entered at the end of the trading day, transactions where 

one or both parties operate in other jurisdictions, and circumstances where local holidays or 

different time zones may limit the ability of the parties to communicate.  Where the parties cannot 

reach agreement on these matters in their written agreements, reasonably designed policies and 

procedures generally should establish the steps that a broker-dealer would take to accommodate 

multiple time zones and local holidays, and how the broker-dealer would plan to accelerate its 

processes to ensure the completion of allocations, confirmations, and affirmations for transactions 

entered near the end of day.  Written agreements and reasonably designed policies and procedures 

could also clearly define, for example, circumstances to avoid, or acceleration procedures to 

follow, when a same-day affirmation may otherwise be difficult to achieve because of potential 

timing constraints.   

For broker-dealers that maintain written agreements, such written agreements often 

establish thresholds or expectations regarding the completion of certain operational processes, and 

such agreements could incorporate thresholds or expectations with respect to end-of-day trading, 

time zones, and local holidays.  When time pressures are especially difficult, the parties could 

negotiate acceleration procedures to complete allocations, confirmations, and affirmations on trade 

date.  When this is not possible, a broker-dealer’s policies and procedures generally should 

establish target time frames on trade date for completing allocations, confirmations, and 

affirmations and describe how the broker-dealer plans to identify and address delays.  The 

Commission is also including in the final rule a requirement that policies and procedures specify 

the procedures the broker-dealer will follow to ensure the prompt communication of trade 

information, investigate any discrepancies in trade information, and adjust trade information to 



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help ensure completion of the allocation, confirmation, and affirmation by the target time frames 

on trade date. 

In this regard, the Commission does not believe the rule, as modified, incentivizes the 

parties to cancel trades because a broker-dealer would not be in violation of Rule 15c6-2 by failing 

to achieve the allocation, confirmation, or affirmation on trade date for a single trade unless it had 

failed to either enter into written agreements or establish, maintain, and enforce reasonably 

designed policies and procedures consistent with the rule.  With respect to policies and procedures 

under Rule 15c6-2, the Commission believes that maintaining and enforcing such policies and 

procedures means that a broker-dealer generally should ensure that it has designed its own systems 

and operations, and deployed sufficient resources to address, any potential systemic failures within 

its own process.288 

In addition, while the Commission specifies in Part III.C.3 several elements that such 

policies and procedures must include to be reasonably designed under Rule 15c6-2 (e.g., 

identification and description of technology systems, operations, and processes that the broker-

dealer uses to coordinate with other relevant parties to ensure completion of the allocation, 

confirmation, or affirmation process for the transaction), the Commission has not included in the 

rule similar elements to be required of written agreements, allowing a broker-dealer flexibility to 

negotiate and draft written agreements with the other parties and, potentially, to explore innovative 

methods for ensuring the allocation, confirmation, and affirmation of the transaction where unique 

operational arrangements specific to a given commercial relationship may enable new or specific 

approaches.  Because written agreements are subject to negotiation with the other relevant parties, 

                                                 
288  See supra note 284 (also discussing several processes that policies and procedures 

generally could include to promote the objectives of the Rule 15c6-2). 



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they are likely to consider a range of commercial interests that derive from the relationship 

between the parties.   

The Commission is not requiring investment advisers to adopt similar policies and 

procedures because investment advisers will not always be among the relevant parties completing 

the allocation, confirmation, and affirmation.  An adviser that enters into a Rule 15c6-2 agreement 

with a broker-dealer, or transacts with a broker-dealer that has policies and procedures reasonably 

designed to ensure timely completion of the allocation, confirmation, affirmation processes 

pursuant to the requirements of Rule 15c6-2, may, as a best practice, wish to evaluate whether its 

policies and procedures are sufficient to ensure compliance with such agreement or other 

obligations requested by the broker-dealer.  

3. Elements of Reasonably Designed Policies and Procedures 

The Commission believes that a policies and procedures approach can be an effective tool 

for ensuring the completion of allocations, confirmations, and affirmations so long as they consider 

holistically the broker-dealer’s available set of tools, responsibilities to the relevant parties, ability 

to communicate and resolve issues among the parties for a given transaction, and provide a 

mechanism for tracking progress over time.  With these objectives in mind, and to ensure policies 

and procedures are effective at achieving the stated objective, the Commission is adding new 

paragraph (b) to Rule 15c6-2 to specify the elements that such policies and procedures should 

include, as discussed further below. 

First, the Commission is requiring under paragraph (b)(1) that policies and procedures be 

reasonably designed to identify and describe any technology systems, operations, and processes 

that the broker-dealer uses to coordinate with other relevant parties, including investment advisers 

and custodians, to ensure completion of the allocation, confirmation, or affirmation process for the 

transaction.  The purpose of this provision is to ensure that the broker-dealer considers holistically 



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the range of systems and tools it has available to facilitate the same-day affirmation objective, as 

well as the range of operations and processes that a broker-dealer uses to facilitate same-day 

affirmations across different customer and commercial relationships.  In this way, such policies 

and procedures can establish whether and when different processes are necessary to facilitate 

same-day affirmations because certain transactions or customer types require different 

arrangements.  For example, a broker-dealer may have a specific policy or operational arrangement 

that addresses allocations, confirmations, and affirmations for a customer whose securities are held 

by a prime broker versus a customer whose securities are held by a bank custodian.  A broker-

dealer generally should also seek written assurances from advisers or custodians to help ensure that 

they understand and internalize their respective roles in facilitating completion of the allocation, 

confirmation, and affirmation process.289  Similarly, the broker-dealer may require different 

arrangements for a customer who engages directly with the broker-dealer versus a customer whose 

investment adviser or custodian engages with the broker-dealer on its behalf.  The broker-dealer 

may also require different systems, operations, or processes to manage customer relationships 

where the other relevant parties to the transaction operate in other time zones or jurisdictions.  

Consistent with paragraph (b)(1), reasonably designed policies and procedures are required to 

                                                 
289  As stated in Part III.C.2, the Commission is not requiring investment advisers to adopt 

policies and procedures similar to those in Rule 15c6-2(b) because investment advisers will not 

always be among the relevant parties completing the allocation, confirmation, and affirmation.  

However, an adviser that transacts with a broker-dealer that has policies and procedures pursuant 

to Rule 15c6-2 may wish to evaluate whether its own policies and procedures are sufficient to 

ensure compliance with obligations requested by the broker-dealer.  Where an adviser transacts 

with such a broker-dealer, the broker-dealer’s policies and procedures may provide that it 

generally should seek written assurances from the adviser that its policies and procedures are 

sufficient to ensure compliance with obligations requested by the broker-dealer.  Similarly, where 

a custodian participates in the allocation, confirmation, or affirmation process with such a broker-

dealer, the broker-dealer’s policies and procedures may provide that it generally should seek 

written assurances that the custodian would comply with obligations requested by the broker-

dealer. 



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identify and describe any technology systems, operations, and processes that the broker or dealer 

uses to coordinate with other relevant parties (such as investment advisers and custodians) to 

ensure completion of the allocation, confirmation, or affirmation process for the transaction.  To be 

reasonably designed, such policies and procedures would need to categorize and assess the range 

of operational arrangements and processes that would be used to facilitate the allocation, 

confirmation, and affirmation process across the full range of different customer and transaction 

types for which it offers services. 

Second, the Commission is requiring under paragraph (b)(2) that policies and procedures 

be reasonably designed to set target time frames on trade date for completing the allocation, 

confirmation, and affirmation for the transaction.  As discussed above, the Commission remains 

mindful that a broker-dealer may not be able to complete the allocation, confirmation, and 

affirmation process on the trade date with respect to every transaction it executes for every 

customer in every circumstance.  Thus, Rule 15c6-2 requires policies and procedures that set target 

time frames on trade date for completing the allocation, confirmation, and affirmation for 

transactions.  The broker-dealer must also enforce its policies and procedures, including those 

related to target time frames, for the range of transaction and customer types it serves, as well as 

the range of systems and operational processes it might employ.  For example, for highly 

automated transactions with high volume customers with direct control over their securities located 

in the same time zone, reasonably designed policies and procedures would set target time frames 

for completing the allocation, confirmation, and affirmation of the transaction very close in time to 

trade execution (i.e., as soon as technologically practicable).  For transactions that are more 

complex, such as those where a customer or its agent operates in other time zones or jurisdictions, 

or a separate custodian maintains securities or cash accounts on the customer’s behalf, a broker-



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dealer may consider how to structure the time frames to accommodate the level of effort that will 

be necessary to complete the allocation, confirmation, and affirmation.  Pursuant to Rule 15c6-

2(b)(1), reasonably designed policies and procedures would be able to categorize the range of 

transactions and customer relationships that it has established and estimate the length of time it 

takes to complete each of the allocation, confirmation, and affirmation to set its target time frames.  

As discussed in Part III.B.1, a broker-dealer is required to enforce its policies and procedures, 

meaning that it is obligated to design its systems and commit the necessary resources to ensure that 

it can comply with its own policies and procedures under the rule. 

Third, the Commission is requiring under paragraph (b)(3) of Rule 15c6-2 that policies and 

procedures be reasonably designed to describe the procedures that the broker-dealer will follow to 

ensure the prompt communication of trade information, investigate any discrepancies in trade 

information, and adjust trade information to help ensure that the allocation, confirmation, and 

affirmation can be completed by the target time frames on trade date.  Although target time frames 

will not always be met, and although affirmations will not always be complete on trade date, a 

broker-dealer is required to enforce its policies and procedures under Rule 15c6-2, and so 

reasonably designed policies and procedures would need to ensure that an action fully within the 

broker-dealer’s own control is not preventing the completion of the allocation, confirmation, or 

affirmation for the transaction.  Thus, paragraph (b)(3) of the rule requires that policies and 

procedures lay out the ex ante steps that the broker-dealer will take to promptly communicate trade 

information, as well as to investigate discrepancies and adjust trade information in response to 

information the broker-dealer receives.   

Fourth, the Commission is requiring under paragraph (b)(4) of Rule 15c6-2 that policies 

and procedures be reasonably designed to describe how the broker-dealer plans to identify and 



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address delays if another party, including an investment adviser or a custodian, is not promptly 

completing the allocation or affirmation for the transaction, or if the broker-dealer experiences 

delays in promptly completing the confirmation.  As with paragraph (b)(3) of the rule, the purpose 

of paragraph (b)(4) is to ensure, to the greatest extent possible, that the broker-dealer is not the 

source of delay in completing the allocation, confirmation, and affirmation process.  As such, 

pursuant to paragraph (b)(4), the broker-dealer should establish ex ante the steps that it would take 

in attempting to obtain an allocation or affirmation from its customer or the other relevant parties 

to the transaction (such as investment advisers or custodians).  In the Commission’s view, broker-

dealers generally should take reasonable steps to escalate issues with their customers, or the other 

relevant parties acting on their customers’ behalf, to resolve issues and meet the target time frames 

set forth in the broker-dealer’s policies and procedures.  In addition, the broker-dealer’s policies 

and procedures generally should identify the circumstances under which a broker-dealer may 

experience delays in promptly completing the confirmation and what steps it would take to resolve 

the delay.  In addition, because a broker-dealer is required to enforce its policies and procedures, 

the Commission believes that it should consider having policies and procedures that explain what 

efforts it would take to resolve recurring problems, particularly if they recur with respect to one 

particular counterparty, customer, or custodian that, for example, routinely fails to meet the broker-

dealer’s targets. 

Finally, the Commission is requiring under paragraph (b)(5) of Rule 15c6-2 that policies 

and procedures be reasonably designed to measure, monitor, and document the rates of allocations, 

confirmations, and affirmations completed within the target time frames established under 

paragraph (b)(2) of the rule, as well as the rates of allocations, confirmations, and affirmations 

completed as soon as technologically practicable and no later than the end of trade date.  The 



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purpose of this requirement is to ensure that each broker-dealer is taking steps to identify when 

allocations, confirmations, and affirmations are completed, whether those completed actions 

occurred within the target time frames established pursuant to paragraph (b)(2), and if not, whether 

those allocations, confirmations, and affirmations were completed on trade date.  In designing its 

policies and procedures, a broker-dealer generally should consider defining what operational 

processes and time frames would enable a transaction to be completed as soon as technologically 

practicable, so that a broker-dealer can assess the rate of transactions that are allocated, confirmed, 

and affirmed as soon as technologically practicable on trade date.  While Rule 15c6-2 does not 

require that same-day affirmation occur for every transaction that a broker-dealer executes and 

settles, for policies and procedures to be effective, the broker-dealer generally should have a sense 

for how well its policies and procedures ensure the completion of the allocation, confirmation, and 

affirmation process as soon as technologically practicable and no later than the end of trade date.  

Metrics developed in response to paragraph (b)(5) generally should be used by the broker-dealer to 

identify and assess the circumstances under which allocations, confirmations, and affirmations are 

less likely to be achieved as soon as technologically practicable and no later than the end of trade 

date so that policies and procedures are updated and revised over time with improvements.  This 

would help ensure that the broker-dealer is effectively maintaining and enforcing its policies and 

procedures, as required by the rule. 

4. Use of Defined Terms Other than “Customer” 

The Commission has previously discussed modifications to Rule 15c6-1(a) to address 

concerns about use of the term “customer” in the rule.  After considering the comments regarding 

definitions of other terms discussed in Part III.B.3, the Commission continues to believe that the 

terms “allocation,” “confirmation,” “affirmation,” and “end of the day on trade date,” are widely 



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used by the industry and are sufficiently understood to facilitate compliance with the rule.290  The 

T+1 Proposing Release explained the commonly understood meanings of these terms.291  

Importantly, the specific application of these concepts may vary in different operational 

arrangements, and ultimately the parties to a transaction must all share a common understanding of 

their meaning to effectively complete the allocation, confirmation, or affirmation process and the 

settlement of the transaction.  Therefore, the Commission is not revising Rule 15c6-2 to define the 

terms “allocation,” “confirmation,” “affirmation,” “end of the day on trade date,” or “trade” for 

purposes of the rule. 

When a broker-dealer will use written agreements under Rule 15c6-2(a)(1), the 

Commission believes that the parties generally should retain discretion to negotiate terms and 

expectations that are consistent with their specific operational arrangements and processes, and 

such negotiations will be most effective without defining terms that, when they do vary in their 

meaning, do so because they have been defined in the context of the operational arrangements 

established to facilitate the affirmation and settlement of the trade.  When a broker-dealer 

determines to establish, maintain, and enforce policies and procedures consistent with Rule 15c6-

2(a)(2), the broker-dealer may choose to define these terms, and any other terms relevant to the 

same-day affirmation objective, either in coordination with the relevant parties to the written 

agreement or in its policies and procedures, to help ensure that all the relevant parties have a 

shared understanding of these generally understood terms. 

5. No Requirement to Link Settlement Instructions to Affirmations 

                                                 
290  See T+1 Proposing Release, supra note 2, at 10453–54.  

291  See id.Conformed to Federal Register version 

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Regarding the comment discussed in Part III.B.2, the Commission is declining to modify 

Rule 15c6-2 to require that the sending of settlement instructions be linked to completion of the 

affirmation.  As first discussed in the T+1 Proposing Release, the Commission believes that same-

day affirmation reduces the likelihood of exceptions or other processing errors that can prevent a 

transaction from achieving timely settlement.292  While completing the affirmation on trade date is 

an indicator that a trade is ready for settlement, it does not necessarily mean that the trade can or 

will settle on a timely basis.  For example, the relevant parties to the transaction may still need to 

take additional steps to facilitate settlement, such as ensuring that securities and funds are available 

in the relevant accounts, after the affirmation has been received.  Accordingly, the Commission 

believes that it may not be appropriate in every circumstance to link the sending of settlement 

instructions with the receipt of an affirmation because this would not necessarily accommodate 

taking of these additional steps necessary to ensure timely settlement.  Nonetheless, the 

Commission has a strong interest in advancing the objective of straight-through processing,293 and 

one effect of increasing the adoption of straight-through processing techniques over time may be 

that, for certain transactions, the parties may determine to link the sending of settlement 

instructions with the submission of a completed affirmation to facilitate the efficient and timely 

settlement of the transaction without unnecessary manual intervention.294 

                                                 
292  See T+1 Proposing Release, supra note 2, at 10454.  

293  See infra Part V (discussing the importance of advancing the objective of straight-through 

processing and adopting new Rule 17Ad-27).  

294  See infra Part V.C.1  (discussing the relationship between policies and procedures for 

straight-through processing at CMSPs and the use of manual processes to complete the settlement 

of securities transactions). 



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In addition, the Commission understands that the customer or the customer’s custodian 

generally retains discretion to determine under what circumstances it is appropriate to link the 

transmission of settlement instructions to the receipt of an affirmation.  The Commission is 

mindful that Rule 15c6-2 only applies to broker-dealers, and, as such, the Commission believes 

that the linking of settlement instructions with the completion of the affirmation would likely 

require the cooperation of the custodian in many cases.  For this reason, the Commission is not 

modifying the rule to include a requirement for linking the transmission of settlement instructions 

to the receipt of an affirmation.  Nonetheless, a broker-dealer could, either in its written 

agreements or in its policies and procedures, set parameters for engaging with its customer or its 

customer’s custodian for the linking of settlement instructions to the completion of the affirmation. 

IV. Advisers Act Rule 204-2 – Investment Adviser Recordkeeping 

A. Proposed Amendments to Rule 204-2 

Under the Commission’s proposed Rule 15c6-2, for contracts where parties agreed to 

engage in an allocation, confirmation, or affirmation process, a broker-dealer would have been 

prohibited from effecting or entering into a contract for the purchase or sale of certain securities on 

behalf of a customer unless it entered into a written agreement with the customer that required the 

allocation, confirmation, affirmation, or any combination thereof to be completed as soon as 

technologically practicable and no later than the end of the day on trade date in such form as may 

be necessary to achieve settlement in compliance with proposed Rule 15c6-1(a).  To the extent that 

investment advisers were party to these agreements, the Commission would have required the 

adviser to retain related records.295  Specifically, the Commission proposed to amend Rule 204-2 

                                                 
295  See T+1 Proposing Release, supra note 2, at 10456 (discussing proposed Rule 204-

2(a)(7)(iii)).    



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under the Advisers Act by adding a requirement that if the adviser is a party to a contract under 

proposed Rule 15c6-2, it must make and keep records of each confirmation received, and any 

allocation and each affirmation sent, with a date and time stamp for each allocation (if applicable) 

and affirmation that indicates when the allocation or affirmation was sent to the broker or dealer.296  

B. Comments 

While commenters generally did not oppose the recordkeeping requirement regarding 

confirmations, allocations, and affirmations, a number of commenters suggested certain 

modifications or clarifications. One commenter opposed proposed Rule 15c6-2’s contract 

requirement but nonetheless supported the recordkeeping of allocations, confirmations, and 

affirmations, stating that “such recordkeeping, coupled with the amendments to the settlement 

cycle rule, should suffice to achieve the Commission’s policy objectives without imposing 

additional burdensome documentation requirements.”297 Another commenter sought clarification 

regarding an adviser’s ability to rely on third parties to meet its recordkeeping obligations for 

allocations, confirmations, and affirmations.298 One commenter objected to the proposed 

amendments to Rule 204-2 on the grounds that neither they, nor proposed Rule 15c6-2, were 

necessary for the transition from to T+2 to T+1 and should not be adopted.299  

                                                 
296  Id.     

297  ICI Letter, supra note 16, at 5 n.15. 

298  See IAA April Letter, supra note 16, at 5–6. 

299  See Fidelity Letter, supra note 16, at 5. 



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C. Final Rule and Discussion 

The Commission is amending the investment adviser recordkeeping rule to require 

registered investment advisers to make and keep records of confirmations they receive and of 

allocations and affirmations they send or receive for any transaction that is subject to the 

requirements of Rule 15c6-2(a).300  Specifically, the Commission is amending Rule 204-2(a)(7)(iii) 

under the Advisers Act to require investment advisers registered or required to be registered under 

section 203 of the Advisers Act to make and keep true, accurate and current certain records with 

respect to any transaction that is subject to the requirements of Rule 15c6-2(a), specifically those 

transactions where a broker-dealer engages in the allocation, confirmation, or affirmation process 

with another party or parties to achieve settlement of a securities transaction that is subject to the 

requirements of § 240.15c6-1(a). The required records include each confirmation received, and any 

allocation and each affirmation sent or received, with a date and time stamp for each allocation and 

affirmation that indicates when the allocation and affirmation was sent or received. As with other 

records required under Rule 204-2(a)(7), advisers will be required to keep originals of written 

confirmations received, and copies of all allocations and affirmations sent or received, but may 

maintain records electronically if they satisfy certain conditions.301 The final amendments to Rule 

204-2 largely reflect, with certain modifications, the approach in the Proposal. 

Requiring the retention of these records is important for the Commission staff’s use in its 

regulatory and examination program and will be helpful to monitor the transition from T+2 to T+1. 

                                                 
300  See Rule 204-2(a)(7)(iii).     

301  See Rule 204-2(a)(7) (requiring making and keeping originals of all written 

communications received and copies of all written communications sent by an investment adviser 

relating to the records listed thereunder); but see Rule 204-2(g) (permitting advisers to maintain 

records electronically if they establish and maintain required procedures). 



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The Commission disagrees with a commenter that argued the proposed amendments to Rule 204-2 

and proposed Rule 15c6-2 are not necessary for the transition from to T+2 to T+1. The 

Commission believes that the timing of communicating allocations to the broker or dealer is a 

critical pre-requisite to help ensure that confirmations can be issued in a timely manner, and 

affirmation is the final step necessary for an adviser to acknowledge agreement on the terms of the 

trade or alert the broker or dealer of a discrepancy. The Commission believes the recordkeeping 

requirements for investment advisers should help establish that obligations of the various parties 

involved in the settlement process related to achieving a matched trade have been met.  Moreover, 

the amendments to Rule 204-2 are intended to reduce risk following the transition to T+1 by 

improving affirmation rates. 

The final amendments to Rule 204-2 apply the new recordkeeping requirements to all 

registered advisers for any transaction that is subject to the requirements of Rule 15c6-2(a).  

Although the proposed recordkeeping requirements would have applied to any registered adviser 

that is a party to a contract under proposed Rule 15c6-2, final Rule 15c6-2 includes a second 

“policies and procedures” option for a broker-dealer engaging in a transaction subject to Rule 

15c6-1(a).  Despite this change, paragraph (a) of the final Rule 15c6-2 applies to the same subset 

of transactions to which proposed Rule 15c6-2 would have applied, and, accordingly, the final 

amendments are designed to keep the scope of the final recordkeeping requirements the same as 

proposed.302 The Commission believes that requiring registered advisers to make and keep records 

                                                 
302  Consistent with the T+1 Proposing Release, we estimate that certain investment advisers 

registered with the Commission will not be required to make and keep the required records 

because they do not have any institutional advisory clients and therefore will not facilitate 

transactions subject to Rule 15c6-2(a).  See T+1 Proposing Release, supra note 2, at nn.424-425 

and related text (estimating that certain advisers registered with the Commission would not be 



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of confirmations received, and allocations and affirmations sent or received with respect to these 

transactions supports the Commission’s policy objectives to ensure that the transaction process is 

completed and trades timely settle on T+1.  In addition, instead of requiring advisers to make and 

keep copies of allocations or affirmations sent and date and time stamps showing when they were 

sent to the broker or dealer, as proposed, the final rule will include allocations and affirmations 

that are sent or received and require date and time stamps showing when they were sent or 

received to clarify the rule text from the proposal.  Finally, instead of requiring “a date and time 

stamp for each allocation (if applicable)” (emphasis added), the Commission removed “if 

applicable” to clarify that a date and time stamp should be included for each allocation sent.  These 

changes are designed to cover circumstances where an adviser receives a copy of allocations or 

affirmations from a third party, such as a custodian or sub-adviser or other party involved in the 

transaction, and require a date and time stamp in each case.  

Based on staff experience as discussed in the T+1 Proposing Release, as well as the 

comments received, the Commission believes that majority of advisers that place the order for 

execution—or sub-advisers or other third parties acting on an adviser’s behalf—make and keep 

originals and/or electronic copies of allocations, confirmations, and affirmations sent or 

received.303  Advisers, which have varied trade allocation processes, often allocate trades through 

                                                 

required to make and keep the proposed required records because they do not have any 

institutional advisory clients and therefore would not enter into a contract under proposed Rule 

15c6-2). 

303  See T+1 Proposing Release, supra note 2, at 10457; see also IAA April Letter, supra note 

16, at 4–7; ICI Letter, supra note 16, at 5; ISITC Letter, supra note 29, at 2. 



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the use of internal systems, portfolio management systems and order management systems.304  

Some advisers, however, may not make and keep these records or may only retain them on paper.  

In many cases, affirmation is performed by the asset owner’s custodian (or its prime broker) on the 

asset owner’s behalf.305  In response to a comment received, the Commission is confirming that an 

adviser may rely on a third party to make and keep the required records, although using a third 

party to make and keep records does not reduce an adviser’s obligations under Rule 204-2.  As 

discussed above, in recognition of the role of third parties, the Commission is requiring advisers to 

keep records of allocations or affirmations sent or received, in the event that the adviser receives a 

copy of such records from a third party.   

As stated in the T+1 Proposing Release, based on staff experience, the Commission 

believes many records are already consistently date and time stamped to the nearest minute using 

either a local time zone or a centralized time zone, such as coordinated universal time, or 

“UTC.”306  The final amendments to Rule 204-2 require advisers to time and date stamp each 

allocation and affirmation.   

The three commenters that discussed the proposed time and date stamping requirement for 

allocations and affirmations did not oppose the proposed time and date stamping requirements, 

                                                 
304  See IAA April Letter, supra note 16, at 4. 

305  See DTCC ITP Forum Remarks, supra note 264 (stating that up to 70% of institutional 

trades are affirmed by custodians); IAA April Letter, supra note 16, at 4 (agreeing that 70% of 

adviser trades are affirmed by the custodian, consistent with information received from its 

members); see also ICI Letter, supra note 16, at 5; ISITC Letter, supra note 29, at 2. 

306  T+1 Proposing Release, supra note 2, at 10456–57. 



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although some sought clarification regarding how the requirement would be applied in practice.307 

One commenter observed that storing timestamps of processing events such as the generation or 

receipt of messages is a good practice that provides opportunities to analyze specific points of 

latency and contributes to an accurate audit trail.308 This commenter also stated that electronic 

communication protocols inevitably include storage of complete event history with timestamps. 

Another commenter, while stating that time stamps are employed today, interpreted our proposal to 

require a single, industry-approved time stamp format based on a common clock, indicating such 

an approach would be challenging.309 This commenter raised other questions, such as what is end 

of trade date in regard to time stamping, and suggested that timestamps for processes that occur 

post-midnight ET may incorrectly identify properly affirmed trades as non-compliant.310 Another 

commenter suggested that the T+1 Proposing Release significantly underestimated the system and 

process changes that will be required and that the proposed requirement for advisers to timestamp 

certain trading records would add further complexity and costs to managers’ efforts.311  

                                                 
307  See ISITC Letter, supra note 29, at 4–5; FIX Trading Letter, supra note 218, at 4; AIMA 

Letter, supra note 29, at 2.  

308  FIX Trading Letter, supra note 218, at 4. 

309  ISITC Letter, supra note 29, at 4–5.  

310  Id. at 4–5 (noting that such considerations include the agreement on the time stamp format, 

evidence of time stamps (for compliance or audit purposes), time differences due to multiple 

systems and participants resulting in time stamps that may not perfectly match, and new processes 

needed to govern resolution of time stamps that could delay trade processing when all pertinent 

trade details are otherwise correct and agreed). 

311  See AIMA Letter, supra note 29, at 2.  



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Although the Commission previously stated in the T+1 Proposing Release that the adviser 

generally should time and date stamp records of allocations and affirmations to the nearest 

minute,312 the Commission agrees with commenters that imposing more prescriptive requirements 

such as an agreed time stamp could result in additional challenges. The Commission is not 

adopting any such requirements for the time and date stamp format in Rule 204-2 or requiring that 

the format used be based on a common clock.  This approach is designed to provide flexibility to 

date and time stamp allocations and affirmations in accordance with existing processes and 

industry practices, while still providing information about when allocations or affirmations were 

sent or received. This approach also avoids the need for prescriptive guidance about what end of 

trade date means, requiring everyone to handle different time zones in the same way, and any 

related costs incurred to follow such guidance. 

Requiring these records, including a time and date stamp of all affirmations and allocations 

(but not confirmations), will aid the Commission staff in preparing for examinations of investment 

advisers and assessing adviser compliance with Rule 204-2 and ultimately help ensure that trades 

involving such advisers will timely settle on T+1. In addition, this requirement will help advisers 

research and remediate issues that may cause delays in the issuance of allocations and affirmations 

and improve their timeliness overall. Requiring these records also will help advisers establish that 

they have timely met contractual obligations, if applicable, or any requirements broker-dealers 

impose in light of their compliance obligations under final Rule 15c6-2.  

V. Exchange Act Rule 17Ad-27 - Requirement for CMSPs to Facilitate Straight-Through 

                                                 
312  See T+1 Adopting Release, supra note 2, at 10456. 



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Processing 

A. Proposed Rule 17Ad-27 

In the T+1 Proposing Release, the Commission proposed new Rule 17Ad-27 to establish 

new requirements for certain clearing agencies acting as CMSPs.313  The Commission proposed 

these requirements to improve the efficiency of institutional trade processing, and better position 

CMSPs to provide services that would not only reduce risk generally, but also help facilitate an 

orderly transition to a T+1 standard settlement cycle, as well as potential further shortening of the 

settlement cycle in the future.314  CMSPs have become increasingly critical to the functioning of 

the securities market over the past twenty years, due in part to the rising volume of securities 

transactions for which CMSPs provide matching and other services.315  A shortened settlement 

cycle may lead to expanded use of CMSPs, as well as an increased focus on enhancing the services 

and operations of the CMSPs themselves.316  While the introduction of new technologies and 

                                                 
313  See id. at 10457.  CMSPs are clearing agencies as defined in section 3(a)(23) of the 

Exchange Act, and as such, are required to register as a clearing agency or obtain an exemption 

from registration.  The Commission has currently exempted three CMSPs from the registration 

requirement.  The Commission also has adopted rules that apply to both registered and exempt 

clearing agencies, including CMSPs operating pursuant to an exemption from registration.  See, 

e.g., Regulation Systems Compliance and Integrity, Exchange Act Release No. 73639 (Nov. 19, 

2014), 79 FR 72252 (Dec. 5, 2014) (“Regulation SCI Adopting Release”). 

314  See T+1 Proposing Release, supra note 2, at 10458. 

315  See id.; see also Press Release, DTCC, Over 1,800 Firms Agree to Leverage U.S. 

Institutional Trade Matching Capabilities in DTCC’s CTM (Oct. 12, 2021), 

https://www.dtcc.com/news/2021/october/12/over-1800-firms-agree-to-leverage-dtccs-ctm; 

DTCC’s Trade Processing Suite Traffics One Billion Trades, Traders Magazine (Feb. 13, 2017), 

https://www.tradersmagazine.com/departments/clearing/dtccs-trade-processing-suite-traffics-one-

billion-trades/. 

316  See T+1 Proposing Release, supra note 2, at 10458. 

https://www.dtcc.com/news/2021/october/12/over-1800-firms-agree-to-leverage-dtccs-ctm
https://www.tradersmagazine.com/departments/clearing/dtccs-trade-processing-suite-traffics-one-billion-trades/
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streamlined operations such as those offered by CMSPs have improved the efficiency of post-trade 

processing over time, the Commission stated in the T+1 Proposing Release that more could be 

done to facilitate further improvements.317  Specifically, the Commission explained that 

eliminating the use of tools that encourage or require manual processing, alongside the continued 

development and implementation of more efficient automated systems in the institutional trade 

processing environment, is essential to reducing risk and costs to ensure the prompt and accurate 

clearance and settlement of securities transactions, particularly in a T+1 environment.318   

As proposed, Rule 17Ad-27 was comprised of two requirements.  First, the proposed rule 

would require a clearing agency that provides central matching services for transactions involving 

broker-dealers and their customers (i.e., CMSPs) to establish, implement, maintain and enforce 

policies and procedures to facilitate STP for transactions involving broker-dealers and their 

customers.319  Second, the proposed rule would require a CMSP to submit to the Commission 

every twelve months a report that describes (i) the CMSP’s current policies and procedures for 

facilitating straight-through processing; (ii) the CMSP’s progress in facilitating straight-through 

processing during the twelve month period covered by the report; and (iii) the steps the CMSP 

intends to take to facilitate and promote STP during the twelve month period following the period 

covered by the report.320   

                                                 
317  See id. at 10457.  

318  See id. at 10458. 

319  See id. at 10458–59.   

320  See id. at 10459–60. 



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Proposed Rule 17Ad-27 would require a CMSP to submit the annual report to the 

Commission using EDGAR, and to tag the information in the report using structured XBRL.321  

The Commission stated in the proposal that this annual report would be made publicly available on 

the Commission’s website to enable the public to review and analyze progress on achieving 

straight-through processing, identify potential improvements to further facilitate straight-through 

processing, and provide the Commission and the public with a centralized, publicly accessible 

electronic database for the reports, facilitating the use of the reported data on straight-through 

processing.322  The proposing release also discussed the Commission’s preliminary view as to its 

intended understanding of various aspects of the two main requirements under proposed Rule 

17Ad-27, including terms used in the rule text.323   

B. Comment Letters from DTCC ITP 

The Depository Trust & Clearing Corporation (“DTCC”), in conjunction with DTCC ITP 

LLC and DTCC ITP Matching (US) LLC, (collectively “DTCC ITP”) submitted two comment 

                                                 
321  See id. at 10459.  This requirement would be implemented by including a cross-reference 

to Regulation S-T in proposed Rule 17Ad-27, and by amending Regulation S-T to include the 

proposed straight-through processing reports.  Pursuant to 17 CFR 232.301 (“Rule 301 of 

Regulation S-T”), the EDGAR Filer Manual is incorporated by reference into the Commission’s 

rules.  In conjunction with the EDGAR Filer Manual, Regulation S-T governs the electronic 

submission of documents filed with the Commission. 

322  See id.   

323  For example, the commonly used term “straight-through processing” was explained in the 

T+1 Proposing Release as to generally refer to processes that allow for the automation of the entire 

trade process from trade execution through settlement without manual intervention.  Id. at 10458 

(citing to Securities Industry Association (SIA), T+1 Business Case Final Report (July 2000) 

(“SIA Business Case Report”), https://www.sifma.org/wp-content/uploads/2017/05/t1-business-

case-final-report.pdf).  

https://www.sifma.org/wp-content/uploads/2017/05/t1-business-case-final-report.pdf
https://www.sifma.org/wp-content/uploads/2017/05/t1-business-case-final-report.pdf


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letters discussing proposed Rule 17Ad-27,324 and these were the only comments received by the 

Commission that extensively discussed proposed Rule 17Ad-27.325  DTCC ITP Matching (US) 

LLC (“ITP Matching US”) operates one of three entities that to date have received from the 

Commission an exemption from registration as a clearing agency to operate as a CMSP.326  ITP 

Matching US currently offers two services to facilitate post-trade processing of institutional trades: 

                                                 
324  See DTCC ITP April Letter, supra note 216; letter from Matthew Stauffer, Managing 

Director and Head of DTCC Institutional Processing, DTCC (Sept. 30, 2022) (“DTCC ITP 

September Letter”).  DTCC ITP Matching (US) LLC is a wholly-owned subsidiary of DTCC ITP 

LLC, a Delaware limited liability company controlled by its sole member, DTCC.  DTCC is the 

parent company of The Depository Trust Company, the National Securities Clearing Corporation, 

and the Fixed Income Clearing Corporation, all registered with the Commission as clearing 

agencies under section 17A of the Exchange Act.  

325 In addition, the Commission received three comment letters from The Options Clearing 

Corporation (“OCC”), State Street, and the FIX Trading Community that referenced proposed 

Rule 17Ad-27.  Like DTCC ITP, OCC recommended including “reasonably designed” in the text 

of any rule requiring a “registrant” to maintain policies and procedures.  See OCC Letter, supra 

note 15, at 3.  State Street supported measures intended to enhance STP at CMSPs, including the 

annual publication of data on matching rates and other similar efficiency metrics.  See State Street 

Letter, supra note 15, at 4.  FIX supported efforts to retire manual mechanisms while ensuring that 

electronic bilateral and central matching mechanisms that support STP are permitted.  See FIX 

Trading Letter, supra note 227, at 4.  Given the brief and general nature of these comments, and 

the fact that they are aligned with comments also made by DTCC ITP, the Commission has 

focused its discussion for the remainder of Part V on the substantive points raised by DTCC ITP. 

326  See Order Granting Exemption from Registration as a Clearing Agency for Global Joint 

Venture Matching Services – U.S., LLC, Exchange Act Release No. 33188 (Apr. 17, 2001), 66 FR 

20494, (Apr. 23, 2001) (“GJVMS Exemption Order”); Order Approving Application for an 

Exemption from Registration as a Clearing Agency for Bloomberg STP LLC and SS&C Techs, 

Inc., Exchange Act Release No. 76514 (Nov. 24, 2015), 80 FR 75388, 75413 (Dec. 1, 2015) 

(“Bloomberg STP and SS&C Techs Exemption Order”).  DTCC ITP Matching US is formerly 

known as GJV Matching Service – US, LLC. 



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(i) TradeSuite ID, an electronic trade confirmation (“ETC”) service;327 and (ii) a central trade 

matching service (“CTM”) for securities transactions (in its capacity as a CMSP).328 

While DTCC ITP generally supported “the Commission’s approach to facilitating T+1 

through the promotion of same-day affirmation, STP and other enhancements in the processing of 

institutional trades at CMSPs as core building blocks to a successful transition to T+1,” DTCC ITP 

raised several concerns about specific aspects of the proposed rule and requested specific 

modifications to the proposed rule text.  DTCC ITP stated that these changes would provide 

additional flexibility and clarity, and better position CMSPs to achieve the stated goals of the 

proposed rule.329  Specifically, and as detailed below, DTCC ITP expressed in its comment letters 

the following concerns. 

                                                 
327  An ETC allows market participants, such as broker-dealers, investment managers, hedge 

funds, banks, custodians, and agents, to coordinate domestic post-trade activities, generally by 

providing trade counterparties with the ability to electronically confirm and affirm certain details 

of their trades.  This automated process eliminates manual and verbal communications in the 

confirmation and affirmation process, thereby reducing risks and facilitating shorter settlement 

timeframes.  For a description of ETCs generally, see GJVMS Exemption Order, supra note 326, 

at 20496. 

328  See DTCC ITP April Letter, supra note 216, at 2.  Generally, TradeSuite ID allows broker-

dealers, buy-side firms, custodians, and agents to confirm and affirm elements of their trades in 

equity and fixed income securities through an automated post-trade process.  CTM allows broker-

dealers and buy-side firms to electronically match block trades, allocations, and confirmations in 

trades involving a wide variety of asset classes and provides a trade allocation and acceptance 

service that communicates trade and allocation details between parties.  See id. at 2–3. 

329  For example, DTCC ITP supported the concept of requiring policies and procedures and 

submission of an annual report but suggested specific recommendations regarding what should be 

included in the annual report.  Further, it supported not “prescribing” the meaning of key terms and 

concepts used in the rule text, such as “allocation,” “confirmation,” “affirmation,” and “customer,” 

or stipulating separate requirements and deadlines for each of these processing functions or 

specifying separate requirements and deadlines for each processing step.  See id. at 3–4. 



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1. Amend Policies and Procedures Requirement to Add “Reasonably 

Designed” To the Current Text 

In its initial comment letter, DTCC ITP suggested that the requirement in proposed Rule 

17Ad-27 for a CMSP to establish, implement, maintain, and enforce policies and procedures 

should be amended so that a CMSP’s policies and procedures are “reasonably designed” to 

facilitate STP.330  The commenter provided a number of reasons to support the amendment.331  

First, in the commenter’s view, the proposed rule is an inflexible standard that places “all 

responsibility” for facilitating STP on the CMSPs, and as such, is inconsistent with the 

Commission’s view of STP generally, and with regard to CMSPs specifically, will undermine the 

stated goal of facilitating STP.332  Further, DTCC ITP expects that the proposed text would result 

                                                 
330  See id. at 4.  The Commission described STP in the T+1 Proposing Release as generally 

referring to the processes that allows for automation of the entire trade process from trade 

execution through settlement without manual intervention.  See T+1 Proposing Release, supra note 

2, at 10458.  In the context of institutional trade processing, STP occurs when a market participant 

or its agent uses the facilities of a CMSP to enter trade details and completes the trade allocation, 

confirmation, affirmation, and/or matching processes without manual intervention.  See DTCC ITP 

April Letter, supra note 216, at 5. 

331  As discussed further in Part V.C.1 below, the Commission concurs with DTCC ITP’s 

general suggestion that amending the policies and procedures requirement to add “reasonably 

designed” is appropriate, but for reasons other than those cited by DTCC ITP in its comment letter.  

See DTCC ITP April Letter, supra note 216, at 4.   

332  See id. at 5.  Because the obligation to develop policies and procedures to facilitate STP, as 

described in proposed Rule 17Ad-27 applies to CMSPs only, the scope of the policies and 

procedures would only include those activities that are within the control of the CMSP, which in 

turn would bind only those entities that are in contractual privity with the CMSP.  Moreover, the 

Commission proposed a number of other rules that required other market participants, namely 

broker-dealers and investment advisers, to comply with specified rules addressing same-day 

affirmation that the Commission anticipates will not only facilitate T+1 but encourage the 

development of more efficient and automated operations, which will in turn further STP.  See 

supra Parts III.A and IV.A concerning proposed Rule 15c6-2 and amended Rule 204-2, 

respectively.  Accordingly, the Commission does not believe that the policies and procedures 

requirement under the proposed rule imposes an inflexible standard that places “all responsibility” 



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in CMSPs avoiding innovation of new technologies that promote STP because of liability 

concerns.333  In contrast, DTCC ITP stated, amending the rule text to reflect a “reasonably 

designed standard” would make the rule consistent with the Commission’s stated policy goals. 

Second, DTCC ITP stated that the “standard” in proposed Rule 17Ad-27 is inconsistent 

with the approach the Commission has applied to CMSPs in the orders exempting matching 

services from registration as a clearing agency because the approach in the exemptive orders is 

more flexible than that of the proposed rule.334  For example, the commenter stated that the 

                                                 

for facilitating STP on the CMSPs or is inconsistent with the Commission’s view of STP generally 

or its stated policy goals.   

333  See DTCC ITP April Letter, supra note 216, at 6. 

334  See id.  The Commission does not agree with DTCC that the “standard” in proposed Rule 

17Ad-27 applicable to the policies and procedures requirement is inconsistent with the approach 

taken in the exemptive orders applicable to CMSPs, but the obligations of the proposed rule and 

the exemptive order are separate and distinct from each other.  The terms of the exemptive order 

include certain obligations relating to (i) operational conditions (e.g., providing the Commission 

with certain audit reports, annual report, annual risk assessments, notice of significant system 

outages, advance notice of material changes, affirmation rate data, record retention, copies of 

service agreements, obligation to not perform any clearing agency function other than those 

permitted by the exemptive order); (ii) interoperability conditions relating to linkages and 

interfaces with other CMSPs; (iii) requirement to negotiate fair and reasonable prices relating to 

such interfaces; and (iv) obligations relating to customer charges for certain activities and 

information.  See GJVMS Exemption Order, supra note 326, at 20498–501.  These conditions 

were established to ensure that ITP Matching US will have sufficient operational and processing 

capacity to facilitate prompt and accurate matching services and are designed to enable the 

Commission to monitor its risk management procedures, operational capacity and safeguards, 

corporate structure and ability to operate in a manner to further the fundamental goals of section 

17A of the Exchange Act.  Proposed Rule 17Ad-27 would impose an additional and separate 

obligation to develop policies and procedures that facilitate STP.  In the exemptive order, the 

Commission has reserved the right to modify by order the terms, scope, or conditions of the 

exemption if it determines that such modification is necessary or appropriate in the public interest 

for the protection of investors, or otherwise in furtherance of the Exchange Act.  GJVMS 

Exemption Order, supra note 326, at 20501.  The Commission believes no such modification is 

necessary because proposed Rule 17Ad-27 is consistent with the conditions set forth within the 

exemptive order. 



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exemptive orders applicable to CMSPs clarify that, in reports required of CMSPs and their service 

providers indicating trade processing timeframes, the CMSP is not responsible for identifying the 

specific cause of any delay in performing its matching service where the fault for such delay is not 

attributable to the CMSP.335  DTCC ITP stated that the approach laid out in the exemptive order is 

the appropriate one because it explicitly acknowledges the fact that the CMSP does not have 

“perfect” control over all aspects of trade processing, even in instances where its systems 

otherwise have been reasonably designed to facilitate STP.  Accordingly, DTCC ITP maintains 

that introducing the reasonably designed policies and procedures standard would eliminate 

inconsistencies between the proposed rule and the exemptive orders. 

Third, DTCC ITP asserts that the proposed standard is inconsistent with the Commission’s 

economic analysis of proposed Rule 17Ad-27.336  Referring to the Commission’s statement in the 

T+1 Proposing Release that the policies and procedures requirement should result in the same 

estimated costs as similar policies and procedures requirements and burden estimates under other 

rules for registered clearing agencies, DTCC ITP noted that those requirements and the attendant 

compliance burdens and costs are based on a “reasonably designed” standard.337  Therefore, DTCC 

ITP stated that it does not believe that the proposed economic analysis relating to burdens and 

                                                 
335  See GJVMS Exemption Order, supra note 326, at 20500.  

336  See DTCC ITP April Letter, supra note 216, at 7. 

337  See id. 



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costs of proposed Rule 17Ad-27 is consistent with the underlying legal standard reflected in the 

proposed rule.338 

Fourth, DTCC ITP stated that “precedent shows” that the Commission’s stated STP goals 

can be achieved by using a standard that includes “reasonably designed.”  As examples, DTCC 

ITP cited to the requirements for registered clearing agencies, which it noted are “replete with 

obligations for such entities to have policies and procedures ‘reasonably designed’ to achieve a 

particular result.”339  Such an approach, DTCC ITP stated, allows the clearing agencies to use their 

experience and understanding of the markets they serve to shape the rules, policies, and procedures 

implementing such rules and such an approach with other clearing agencies’ rules has resulted in 

outcomes that benefit the resilience and ongoing evolution of the national clearance and settlement 

system.340  DTCC ITP also stated that CMSPs are already subject to a reasonably designed policies 

and procedures standard pursuant to their requirements under 17 CFR 242.1000 through 242.1007 

(“Regulation SCI”).341 

2. Use of ETCs and Manual Processes 

DTCC ITP stated that the proposed rule should not “abruptly force” or require an 

immediate “disorderly elimination” of ETC services and related manual processes used by market 

                                                 
338  See id.; see also infra Part VIII.C for further information on DTCC ITP’s comment 

regarding the Commission’s economic analysis. 

339  DTCC ITP April Letter, supra note 216, at 7.  DTCC ITP specifically cites to Rule 17Ad-

22(e), the set of Commission rule provisions applicable to covered clearing agencies.  See 17 CFR 

240.17Ad-22(e).   

340  See DTCC ITP April Letter, supra note 216, at 7.  

341  See id.; see also 17 CFR 242.1001 through 242.1007. 



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participants today.342  Instead, DTCC ITP recommended ensuring that the proposed rule does not 

force market participants to move away from ETC services in a sudden and disruptive manner and 

clarify the degree to which CMSPs are responsible for realizing the Commission’s goal of moving 

away from manual processes as soon as technologically practicable.343 

DTCC ITP requested additional clarity around the practical applications of manual 

processing when its use is necessary for, or its elimination may undermine, prompt and accurate 

settlement of transactions.344  Further, DTCC ITP noted that in certain circumstances the parties to 

a trade may need to engage in manual interventions to ensure the accuracy of trade and settlement 

                                                 
342  DTCC ITP April Letter, supra note 216, at 7.  See infra Part V.C.1 (discussing the 

Commission’s approach to the use of manual operations, including those related to ETC services, 

under adopted Rule 17Ad-27). 

343  See id. at 8–9.  The T+1 Proposing Release stated that with respect to the use of ETCs that 

impede the development of STP and which often rely on legacy technologies, a CMSP’s policies 

and procedures generally should establish a timeline for transitioning users away from such 

manual processes to service offerings that can reduce a party’s reliance on the manual, often 

sequential, entry and reconciliation of trade information.  T+1 Proposing Release, supra note 2, at 

10458.  However, as stated in that release, proposed Rule 17Ad-27 did not require CMSPs to 

remove manual processes if doing so would clearly undermine the prompt and accurate clearance 

and settlement of securities transactions.  See id. at 10458–59.  As discussed in Part V.C below, 

Rule 17Ad-27 will allow CMSPs some flexibility in designing policies and procedures that reduce 

or eliminate manual operations in a manner that does not undermine the CMSP’s obligations under 

section 17A of the Exchange Act and are appropriate for the CMSP’s particular operations, 

services, and business models.  See infra Part V.C.1.  This flexibility applies to CMSPs general 

operations as well as any associated with ETC services.  Moreover, if the ETC is not impeding the 

development of STP, the CMSP may determine the use and operations of the ETC is consistent 

with both the obligations required of CMSPs pursuant to adopted Rule 17Ad-27 as well as those 

under section 17A of the Exchange Act. 

344  See DTCC ITP April Letter, supra note 216, at 9.  DTCC ITP stated that more clarity is 

needed to better understand what constitutes a manual process and if, when, and how the use of 

manual processes may be acceptable under proposed Rule 17Ad-27.  For example, DTCC ITP 

cited the need for additional clarity as to how removing a manual process could “clearly 

undermine” settlement, what factors would be taken into account in applying this standard, and 

whether unmatched trades and fails or exceptions.  See id.   



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information and minimize operational or other risks that may prevent settlement.345  Therefore, 

according to DTCC ITP, the rule should not require without further study the removal of manual 

processes if doing so would undermine the prompt and accurate settlement of securities 

transactions.  Similarly, DTCC ITP stated that it seeks more clarity around the Commission’s 

description of the CMSP’s role in facilitating a transition away from manual processes, particularly 

as it relates to ETC services and timelines for transitioning away from manual processes, some of 

which may not be under the CMSP’s control.346 

DTCC ITP also raised concerns about the requirement that the CMSP explain in its policies 

and procedures why manual processes remain necessary as part of its systems and processes and 

consider developing processes that would eliminate the underlying issues that drive the use of 

manual process.347  It is unclear, according to DTCC ITP, how this requirement relates to the 

broader aspects of the proposal concerning the facilitation of STP.  By way of example, DTCC ITP 

posed a number of questions regarding: (i) how the requirement aligns with the requirement to 

facilitate STP; (ii) what practical efforts should the CMSP undertake when it considers developing 

processes that eliminate the underlying reason for the persistent use of manual processes; (iii) what 

is the relevancy of a cost benefit analysis in developing policies and procedures; and (iv) what 

particular factors a CMSP should consider.348  

                                                 
345  See id. 

346  See id. at 9–10.  

347  See id. at 10. 

348  See id.  As discussed in Part V.C of this release, the use of manual operations or automated 

operations that may result in manual intervention is a potential source of risk and costs both at the 

CMSPs and in the U.S. clearance and settlement system.  Moving towards a processing 

environment that facilitates STP at the CMSP should help alleviate some of these risks and costs.Conformed to Federal Register version 

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To help address these concerns, DTCC ITP recommended that the Commission provide 

further guidance in the form of high-level principles or standards regarding what is intended by the 

concept “as soon as technologically practicable” to minimize or eliminate manual processing for 

either the input of trade details or to resolve errors and exceptions that can prevent settlement.349  

DTCC ITP suggested that achieving something as soon as technologically practicable should entail 

a determination that the intended outcome is commercially reasonable, economically viable, and 

operationally scalable.350 

3. Amend the Annual Reporting Requirement to Better Achieve Transparency 

While generally supporting the requirement for CMSPs to file annual reports, DTCC ITP 

stated that it did not understand the particular elements it would be required to include in the 

annual report, or how those elements supported the Commission’s stated objectives of the annual 

                                                 

As stated in the T+1 Proposing Release, the Commission understands that at this time there may be 

certain scenarios where human intervention is necessary or prudent, however, as technology and 

the markets evolve over the near term, the expectation is that CMSPs would attempt to reduce or 

eliminate instances where human intervention is required.  T+1 Proposing Release, supra note 2, at 

10458–59.  

349  See DTCC ITP April Letter, supra note 216, at 10.  The T+1 Proposing Release stated that 

a CMSP facilitates STP when its policies and procedures enable its users to minimize or eliminate, 

to the greatest extent that is technologically practicable, the need for manual input of trade details 

or manual intervention to resolve errors and exceptions that can prevent settlement of the trade.  A 

CMSP also facilitates straight-through processing when it enables, to the greatest extent that is 

technologically practicable, the transmission of messages regarding errors, exceptions, and 

settlement status information among the parties to a trade and their settlement agents.  T+1 

Proposing Release, supra note 2, at 10458.  However, as discussed in Part V.C.2 below, there may 

be situations where the minimization or elimination of certain manual operations is not appropriate 

or feasible in the near term.  The facts and circumstances determining “as soon as technologically 

practicable” will vary across CMSPs, depending upon their services, systems, and business 

models.  Accordingly, CMSPs should generally use their expertise to assess the extent to which a 

specific policy or procedure is appropriately designed to facilitate STP.  

350  See DTCC ITP April Letter, supra note 216, at 10.  



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report, and expressed concerns about a CMSP’s ability to complete the annual report consistent 

with the Commission’s goals.351  DTCC ITP also expressed concerns that a description of some 

types of information in its policies and procedures may contain proprietary or confidential 

information, and as such, a description of its policies and procedures should not be required in the 

annual report.352  As an alternative, DTCC ITP recommended that the annual report provision of 

the proposed rule be amended to focus more on quantitative reporting and less on qualitative 

descriptive reporting.  Specifically, DTCC ITP recommended eliminating proposed subsections (a) 

through (c) of proposed Rule 17Ad-27 requiring specified descriptions, and instead recommended 

including a requirement in the rule text for public reporting of quantitative data on an anonymized 

and aggregated level for rates of allocation, confirmation, affirmation and/or matching over the 

twelve month period covered by the report.353  Further, DTCC ITP suggested disclosure of 

additional data elements, such as affirmation rates for institutional trade and prime brokerage trade 

flows, and affirmation rates for institutional trade flows achieved separately through an ETC or 

through a central matching facility.354 

                                                 
351  See id. at 11.  For example, DTCC ITP expressed concerns that the term “description” 

needs more clarity related to required content and level of detail. 

352  See id.  DTCC ITP stated that requiring a CMSP to engage in the future cost and effort of 

analyzing the need for confidential treatment of such information will impede efforts by CMSP to 

innovate.  See infra Part V.C.2 for the Commission’s discussion of treatment of confidential 

information. 

353  See DTCC ITP April Letter, supra note 216, at 12.  As discussed further in Part V.C.2 

below, the Commission is retaining the qualitative and quantitative aspects of the annual report, 

but has modified that requirement to address the anonymization and aggregation issues described 

in this comment letter.   

354  See id.; see also infra Part V.C.2 for the discussion of the metric requirements under Rule 

17Ad-27(b), as adopted. 



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To provide further detail regarding the content of the annual report as it relates to 

quantitative reporting requirements, DTCC ITP submitted its second comment letter.355  Based on 

its review of the data available in its systems, DTCC ITP stated its belief that certain high-level 

categories of metrics that should be included in the rule text for proposed Rule 17Ad-27 to help 

objectively demonstrate trends toward more automation, less manual intervention, and progress 

towards STP.356  Defining specific metric categories, DTCC ITP stated, would promote 

consistency and clarity across reporting and leave some flexibility for CMSPs to provide metrics 

which may be most appropriate to their specific activities and services.357  Recommendations for 

specific data categories included: (i) trade volume metrics, such as the total number of allocations 

and confirms submitted to a CMSP’s matching service and total number of confirmations and 

cancelled confirmations submitted to an ETC service; (ii) matching metrics, such as the percentage 

of allocations and confirmations submitted to the CMSP that are matched or matched/auto-

affirmed by specified timeframes on trade date; (iii) affirmation metrics, including the percentage 

of institutional and prime broker confirmations submitted to an ETC that are affirmed by specified 

timeframes on trade date; and (iv) STP metrics, such as data concerning manual processes.358 

                                                 
355  See DTCC ITP September Letter, supra note 325. 

356  See id. at 2. 

357  See id. 

358  See id. at 2–3.  Part V.C.2 below further discusses the quantitative data requirements under 

Rule 17Ad-27(b), as modified.  As discussed in that section, the Commission is opting to specify 

the particular data required under the rule rather than require data categories to ensure the data will 

capture specific information that can enable effective analysis of the CMSPs’ progress in 

facilitating STP.   



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DTCC ITP also requested clarity as to when CMSPs would be required to submit their 

initial annual reports, as well as the time period applicable to the actual content to be included in 

the initial annual report.359  DTCC ITP recommended that the initial twelve-month reporting 

period should begin after both the T+1 compliance date and the same-day affirmation rules come 

into effect, which according to DTCC ITP will provide a baseline that is predicated on 

implementation of all Commission requirements designed for a T+1 settlement cycle, and will 

provide a clear review and analysis of progress in advancing STP on a year-by-year basis without 

having to adjust to interpret reporting periods when the rules were not entirely in effect across the 

whole post-trade market.360   

4. Support Further Standardization of Industry Protocols and Reference Data 

DTCC ITP recommended that the Commission prioritize the development of proposals 

requiring market participants to increase the use of standardized settlement instructions 

(“SSIs”).361  Promoting greater adoption of SSIs, DTCC ITP stated, is critical to addressing the 

potential risk of settlement errors and fails in a T+1 environment, and DTCC ITP further stated its 

belief that centrally managed SSIs become even more critical in terms of the secure transmission 

                                                 
359  See id. at 3.  Part V.C.3 below further discusses the required contents and timing of the 

initial and subsequent annual reports under adopted Rule 17Ad-27(c). 

360  See id.  DTCC ITP indicated in its comment letter that it is considering publishing the 

annual report on its website to provide the public with ready access to the information.  See id. at 

4.  Part V.C.4 below further describes the filing requirements and provides related guidance 

regarding the filing of the annual report. 

361  See DTCC ITP April Letter, supra note 216, at 8.  The use of SSIs is just one of many 

standardization mechanisms available to assist CMSPs in streamlining their internal operations to 

reduce reliance on manual processes, which can facilitate STP.  Part V.C.1 below discusses SSIs in 

the context of the development of the CMSP’s policies and procedures under Rule 17Ad-27(a).  

See infra note 386.   



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of sensitive account and reference data necessary for settlement.362  DTCC ITP asserted that 

increased focus on, and the consequences of, cyber risk and fraudulent activity also necessitate the 

need for fully automated and centralized management and secure communication of critical SSI 

reference data, and noted an industry survey that indicated SSI-related issues continue to be one of 

the most common reasons for settlement fails.363  

C. Final Rule and Discussion 

CMSPs facilitate communications among a broker-dealer, an institutional investor or its 

investment adviser, and the institutional investor’s custodian to reach agreement on the details of a 

securities transaction, enabling the trade allocation, confirmation, affirmation, and/or the matching 

of institutional trades.364  Once the trade details have been agreed among the parties or matched by 

the CMSP, the CMSP can then facilitate settlement of the transaction.   

As mentioned above and detailed in the T+1 Proposing Release, the rising volume of 

transactions for which CMSPs provide matching and other services have caused CMSPs to become 

increasingly critical to the functioning of the securities market.365  The Commission anticipates 

that a shortened settlement cycle may lead to further expanded use of CMSPs, as well as increased 

focus on enhancing the services and operations of the CMSPs themselves.366  In addition, some 

                                                 
362  See id. 

363  See id. 

364  For a general description of the role of CMSPs in the U.S. markets, see T+1 Proposing 

Release, supra note 2, at 10439. 

365  See supra note 315 and accompanying text.  

366  See T+2 Proposing Release, supra note 4, at 69258.  For example, increasing the efficiency 

of using a CMSP can reduce the risk that a trade will fail to settle and reduce costs associated with 



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SRO rules currently require the use of CMSP services for institutional trade processing.367  The 

Commission believes that more could and should be done to ensure that CMSPs, as critical utilities 

in the securities market, are operating in a manner that improves the clearance and settlement of 

securities transactions through improvements in efficiency, risk reduction, and costs.  Reducing 

and, where possible, eliminating the use of tools and services that encourage or require manual 

processing, along with the continued development and implementation of more efficient automated 

systems that facilitate STP in the institutional trade processing environment at the CMSP, is 

essential to improving those efficiencies, as well as reducing risk and costs, to ensure the prompt 

and accurate clearance and settlement of securities transactions.368   

Over the past decade CMSPs have become increasingly connected to a wide variety of 

market participants in the U.S.369  New Rule 17Ad-27 will require CMSPs, and by extension their 

users, to assess their processes and find solutions to reduce or eliminate reliance on services at 

CMSPs that involve manual or inefficient processes or otherwise do not further facilitate STP in 

the institutional trade processing environment.  This in turn should better position CMSPs to 

provide services that not only reduce processing risk and costs, but also generally facilitate a more 

                                                 

correcting errors that result from the use of manual processes and data entry, thereby improving 

the overall efficiency of the U.S. clearance and settlement system.   

367  See, e.g., Financial Industry Regulatory Authority (FINRA) Rule 11860 (requiring a 

broker-dealer to use a registered clearing agency, a CMSP, or a qualified vendor to complete 

delivery-versus-payment transactions with their customers). 

368  See T+1 Report, supra note 61, at 9. 

369  See, e.g., DTCC, About DTCC Institutional Trade Processing, 

https://www.dtcc.com/about/businesses-and-subsidiaries/dtccitp (noting that DTCC ITP, parent to 

DTCC ITP Matching, serves 6,000 financial services firms in 52 countries).  

https://www.dtcc.com/about/businesses-and-subsidiaries/dtccitp


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orderly transition to a T+1 standard settlement cycle in the near term,370 as well as potential further 

shortening of the settlement cycle in the future. 

Accordingly, the Commission is adopting proposed Rule 17Ad-27 with modifications.  As 

explained further below, the Commission is adding the language “reasonably designed” to the 

policies and procedures requirement in paragraph (a), adding additional requirements in paragraph 

(b) to specify the data to be included in the annual report, and adding paragraph (c) to explain the 

required timing of filing the annual report.  The Commission believes these changes are responsive 

to the commenter’s concerns and provide CMSPs flexibility to address individualized operations, 

services, types of users, and business objectives, and provide specificity to the data requirements 

while at the same time retaining those provisions that facilitate achieving the stated objectives of 

the new rule.  In addition, and as discussed in more detail below, the Commission is making 

several technical modifications, including reorganizing the specific obligations under the proposed 

rule by subdividing those obligations into paragraphs (a) through (d), and adopting revisions to 

other technical aspects of and terms used in the proposed rule text to improve clarity.   

1. New Rule 17Ad-27(a) – Requirement for Policies and Procedures 

As discussed below, the Commission is retaining the proposed requirement in Rule 17Ad-

27 to establish, implement, maintain, and enforce policies and policies, but is making several 

modifications.   As with the proposed rule, the final rule will require CMSPs to develop policies 

and procedures focused on facilitating improvements in their operations, systems, and user 

                                                 
370  As discussed in Part II above, the T+1 Report contemplates moving the “ITP Affirmation 

Cutoff” from 11:30 a.m. ET on the day after trade date to 9:00 p.m. ET on trade date.  See T+1 

Report, supra note 61, at 13, 39.  



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obligations to further the development of STP371 in the processing of institutional trades, improve 

efficiency, facilitate both cost and risk reduction in the clearance and settlement of institutional 

trades generally, and better accommodate shorter settlement cycles.372  The requirement to 

establish, implement, maintain and enforce policies and procedures in new Rule 17Ad-27(a) is as 

an important and efficient mechanism that will require CMSPs, and by extension those market 

participants that choose to rely on CMSPs to facilitate clearance and settlement, to develop and 

implement specific operational procedures and systems to facilitate STP.  This, in turn, will enable, 

over time, STP in the post-trade processing of institutional trades.  Importantly, the rule will also 

encourage the development of strategic plans on a forward-looking basis to facilitate STP within 

the CMSP’s operating framework and to facilitate internal and external assessments as to the 

viability and implementation of those strategic plans.  By virtue of the expanded use of CMSPs 

generally and the global nature of post-trade processing today, the Commission anticipates that 

these efforts will require CMSPs to coordinate their development activities with a variety of other 

market participants that impact the CMSPs’ ability to provide beneficial efficiencies, which should 

                                                 
371  As discussed above, the term “straight-through processing,” as used by the financial 

services industry, generally refers to processes that allow for the automation of the entire trade 

process from trade execution through settlement without manual intervention.  See supra note 330.  

In the context of institutional trade processing under this rule, STP occurs when a market 

participant or its agent uses the facilities of a CMSP to enter trade details and completes the trade 

allocation, confirmation, affirmation, matching processes, or any combination thereof, without 

manual intervention.   

372  In some cases, the use of manual or inefficient processing introduces errors and operational 

risks that delay settlement and may result in a failure to settle the transaction.  The Commission 

believes that, by engaging in the process of developing and periodically assessing their policies 

and procedures, CMSPs will not only foster solutions to mitigate or alleviate these inefficiencies 

and risks internally but also consider these issues as they apply to the general processing stream 

that may be relevant to the CMSP’s operations and its users.  



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in turn encourage the use of CMSPs.  Finally, the development of policies and procedures by 

CMSPs will facilitate the Commission’s ongoing development of the national clearance and 

settlement system generally by enhancing the oversight of CMSPs and ensuring a documented 

approach to further STP. 

Specifically Rule 17Ad-27(a), as adopted, requires a clearing agency that provides a central 

matching service (i.e., a CMSP) to establish, implement, maintain, and enforce written policies and 

procedures reasonably designed to facilitate straight-through processing of securities transactions 

at the clearing agency.373  Because the policies and procedures requirement is distinct from the 

annual report requirement (discussed below), this requirement is now designated as new paragraph 

(a) in final Rule 17Ad-27, as adopted.  The final rule also removes the reference to “transactions 

involving broker-dealers and their customers” because it is only explanatory text describing the 

types of parties that may use a central matching service and therefore is unnecessary to include in 

the rule text.374  Lastly, the final rule makes clear that the policies and procedures must be 

“written.” 

The provision to “establish, implement, maintain, and enforce” written policies and 

procedures requires the CMSP to establish and implement such policies and procedures by the 

compliance date and to ensure that the policies and procedures remain current on an ongoing basis, 

including by implementing timely updates or revisions.375  Moreover, the requirement to “enforce” 

                                                 
373  The new rule text adds the word “written” to the policies and procedures requirement to 

require that the policies and procedures must be established as a written document.  

374  See, e.g., Bloomberg STP and SS&C Techs Exemption Order, supra note 326, at 75388–90 

(generally describing the clearing agency applicants as providers of a “matching service” or 

“central matching service” without reference to the types of customers served). 

375  See infra Part VII for a discussion of the compliance dates.  



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requires the CMSP to develop a reasonable approach with sufficient specificity to ensure that its 

users comply with any required user obligations and to make clear any consequences of non-

compliance within the established policies and procedures framework and the timeframes 

associated with any such consequences.  The Commission encourages, but does not require, the 

CMSP to provide users with access to the required CMSP policies and procedures well in advance 

of any compliance obligations applicable to users to ensure that they can thus make the necessary 

arrangements or changes to comply with any user obligations contained therein.   

The periodic review required by the “establish, implement and maintain” component of the 

CMSP’s policies and procedures requirement under adopted Rule 17Ad-27(a) should also help 

ensure that a CMSP considers in a holistic fashion how the obligations it requires of its users will 

advance the implementation of methodologies, operational capabilities, systems, or services that 

support STP.  It should also encourage the CMSP and its users to identify inefficiencies and 

manual processes that impede the STP objective and, to the extent possible, develop automated 

and streamlined solutions to address those issues.   

The scope of the policies and procedures required under new paragraph (a) generally 

should focus on those aspects of the CMSP’s operations and services that directly or indirectly 

relate to facilitating STP in the processing of institutional trades at the CMSP.376  The Commission 

understands that the CMSP only controls its internal functions, and not those of its users, and as 

such, the rule as adopted requires the CMSP to design its policies and procedures around its own 

                                                 
376  Accordingly, those aspects of the CMSP’s operations or services that are not directly or 

indirectly related to facilitating STP are not required to be included in the policies and procedures 

required under Rule 17Ad-27(a).  However, the rule does not preclude the CMSP from adopting 

policies and procedures that are beyond the scope of Rule 17Ad-27(a). 



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internal functions and services.  However, and to the extent practicable, the Commission 

encourages CMSPs to develop a policies and procedures framework that incentivizes CMSP users 

and their customers to adopt and implement the necessary systems and services within their own 

firms to make full use of the CMSP’s systems that facilitate STP.377  While some of this may occur 

organically as CMSP users that agree to use specific CMSP services or systems reconfigure their 

systems to accommodate the initial and updated CMSP policies and procedures, CMSPs generally 

should also endeavor to create incentives within the policies and procedures framework that 

encourage more widespread use of their STP-oriented systems, both among current CMSP and 

non-CMSP users.  For example, creating cost-saving operational efficiencies within the CMSP or 

developing attractive price structures may create incentives for more widespread use of the CMSPs 

services. 

Moreover, the policies and procedures framework generally should also endeavor, to the 

extent prudent, to dis-incentivize the use of manual systems or automated systems that do not 

facilitate STP.378  The Commission views the facilitation of STP as providing the necessary 

                                                 
377   While the CMSPs policies and procedures will directly affect the systems and processes of 

its users by requiring the use of those systems and processes to be in compliance with the CMSP’s 

STP friendly systems and processes, the CMSP’s STP efforts also may indirectly affect the 

systems and process of other non-user market participants that either interact with CMSP users or 

by virtue of the CMSP role as a centralized utility in the market.  The standardization of industry 

practices toward realizing increased STP capabilities internal and external to the CMSPs should in 

turn promote the eventual elimination of manual processing.   

378  For example, as noted by DTCC ITP in its comment letter, systems or operations that 

standardize certain operational functions, such as the use of SSIs, may help alleviate the need for 

manual operations.  See DTCC ITP September Letter, supra note 325, at 2–3.  However, as noted 

above, the use of SSIs is just one of many mechanisms available to assist CMSPs in streamlining 

their internal operations and in turn facilitating STP.  Given that individual CMSPs may vary in the 

services provided or the operations and systems used to provide those services, to the extent that 

the use of SSIs is applicable in a particular CMSP’s operations, the Commission encourages the 

CMSPs to consider developing incentives or requirements in their policies and procedures to 

encourage or compel the use of SSIs.  See supra note 361. 



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efficiencies, both on a technological, operational, and service level, to remove to the extent 

practicable and prudent the need for manual intervention (or automated systems that result in the 

need for manual intervention) in the acceptance of trade information and the process by which the 

CMSP provides for allocation, confirmation, affirmation, and matching services.  The Commission 

also understands that at this time there may be scenarios where human intervention is necessary or 

prudent.  However, as technology and the markets evolve over the near term, CMSPs should 

consider reducing or eliminating instances where human intervention is required as soon as 

reasonably possible, both on a technological and operational basis.   

To provide flexibility and discretion in the development of a particular CMSP’s policies 

and procedures, the Commission is adding the new language “reasonably designed” to the policies 

and procedures requirement in final Rule 17Ad-27(a), as adopted.  The insertion of the language 

“reasonably designed” in the policies and procedures requirement should allow CMSPs to tailor 

their policies and procedures to accommodate their individualized internal operations, systems, 

business models and users as they determine how best to facilitate STP within their particular 

processing environment and to mitigate any issues particular to that CMSP that frustrate achieving 

STP.  That discretion should allow the CMSP to determine whether specific policies and 

procedures designed to further STP are reasonable relative to certain considerations applicable to 

that particular CMSP and its users, particularly as those assessments may change over time.  

Moreover, and as explained by the commenter, given that other Commission rules applicable to 

clearing agencies incorporate a “reasonably designed” component in the policies and procedures 



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required under such rules, CMSPs should have familiarity and experience in drafting “reasonably 

designed” policies and procedures, as required by new Rule 17Ad-27(a).379    

In structuring a plan to facilitate STP through reasonably designed policies and procedures, 

a CMSP generally should evaluate its operations and systems to determine potential sources of 

inefficiency or manual operation that exist within the current CMSP’s processing stream, and 

consider addressing these frictions in a manner that does not disrupt the CMSP’s ability to 

facilitate the prompt and accurate settlement of securities transactions.380  Rule 17Ad-27 does not 

require CMSPs to force market participants to move away from ETC services in a sudden and 

disruptive manner or eliminate manual processing completely or on any particular timeframe if 

doing so would result in creating inefficiencies or impair the prompt and accurate settlement of 

securities transactions.381  CMSPs generally should, however, review their STP plans annually to 

assess whether new disincentives to use manual processes are appropriate, particularly in light of 

any recent market changes or technological innovations.    

                                                 
379  See, e.g., 17 CFR 232.1001(a)(1), (b)(1), and (c)(1) (relating to the policies and procedures 

requirements under Regulation SCI).  Regulation SCI is applicable to both clearing agencies that 

are registered as well as those that are exempted from registration.  See, e.g., 17 CFR 240.17Ad-

22(d) and (e) (relating to the core clearing agency rules under section 17A of the Exchange Act, 

which are applicable to only those clearing agencies that are registered). 

380  The use of manual operations may arise for a number of reasons, including because (i) 

there is no automated system that facilitates a particular activity; (ii) a user has not availed itself of 

the automated process offered by a CMSP; or (iii) input into an automated system is rejected, 

resulting in the need to manually reconcile the situation.  STP endeavors to eliminate manual 

processes by automating the entire trade process from trade execution through settlement without 

manual intervention.  See T+1 Proposing Release, supra note 2, at 10458; see also supra note 323 

and accompanying text. 

381  See supra Part V.B.2 (discussing DTCC ITP comments regarding manual processing). 



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As it develops its policies and procedures to facilitate STP, a CMSP may consider factors 

relevant to that CMSP in assessing whether any identified issues can or should be addressed and if 

so, how best to implement those changes.382  For example, such factors may include: (i) the 

significance of certain obstacles to STP as it relates to other clearance and settlement functions and 

objectives, including operational efficiency and operational risk management; (ii) the frequency 

and impact of a particular issue; or (iii) the cost of resolving the issue versus the benefit.  The 

flexibility afforded by the insertion of the reasonably designed language in new Rule 17Ad-27(a) 

also should allow CMSPs to better account for changes over time in technology, markets, business, 

and other advancements that promote accurate clearance and settlement, as well as any costs 

associated with particular policies or procedures relative to the benefits.  Accordingly, the 

inclusion of “reasonably designed” should aid in the development of more effective and efficient 

CMSP policies and procedures required under Rule 17Ad-27, as adopted. 

 

Under the rule, a CMSP facilitates STP when its policies and procedures enable its users to 

minimize or eliminate, to the greatest extent that is technologically practicable, the need for 

manual input of trade details, the manual intervention to resolve errors and exceptions that can 

prevent settlement of the trade, or the transmission of messages regarding errors, exceptions, and 

settlement status information among the parties to a trade and their settlement agents that impede 

the ability of the CMSP to achieve an STP environment.  In considering generally how to develop 

policies and procedures that facilitate STP, a CMSP generally should consider the full range of 

                                                 
382   As discussed further below, the CMSP will be required pursuant to Rule 17Ad-27(b)(2) to 

provide a qualitative description of its progress in facilitating STP in its annual report to the 

Commission.  For example, the report may describe the CMSP’s approach and rationale for 

addressing or not addressing any issues identified as obstacles to facilitating STP.  See infra Part 

V.C.2. 



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operations and services related to the processing of institutional trades for settlement and establish 

a holistic framework for STP on a CMSP-wide basis.  CMSPs should also generally consider and 

address how the services, systems, and any operational requirements a CMSP applies to its users 

ensure that the CMSP’s policies and procedures advance the goal of achieving straight-through 

processing for trades processed through it.  Moreover, the CMSP generally should ensure that its 

systems, operational requirements, and the other choices it makes in designing its services, enable 

and incentivize prompt and accurate settlement without manual intervention or without automated 

processes that may result in manual intervention. 

For example, a CMSP’s policies and procedures generally should explain the criteria that 

the CMSP applies to determine when a “match” has been achieved, including any relevant 

tolerances that it or its users might apply to achieve a match, and the extent to which such criteria 

should be standardized or customized.383  With respect to the use of ETCs that impede the 

development of STP, and which often rely on legacy technologies, a CMSP’s policies and 

procedures generally should establish a timeline for transitioning users away from such manual 

processes to service offerings that can reduce a party’s reliance on the manual, often sequential, 

entry and reconciliation of trade information.384  Where the CMSP acts as a communication 

                                                 
383  The use of SSIs is just one of many standardization mechanisms available to assist CMSPs 

in streamlining their internal operations to reduce reliance on manual processes, which can 

facilitate STP.  Given that individual CMSPs may vary in the services provided or the operations 

and systems used to provide those services, the Commission does not believe requiring the use of 

SSI, or any other particular standardization mechanism, in Rule 17Ad-27 would be appropriate.  

However, to the extent that the use of SSIs is applicable in a particular CMSP’s operations, the 

CMSP generally should consider developing incentives or requirements in its policies and 

procedures to encourage or compel the use of SSIs.  See supra note 362. 

384  In its comment letter, DTCC ITP sought more clarity around the Commission’s description 

of the CMSP’s role in facilitating a transition away from manual processes, particularly as it 

relates to ETC services and timelines for transitioning away from manual processes, some of 



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platform for different market participants to transmit messages regarding errors, exceptions, and 

settlement status information among the parties to a trade and their settlement agents, the CMSP 

generally should consider the extent to which its policies, procedures, and processes restrict, 

inhibit, or delay the ability of users to transmit such messages used in the preparation or 

transmission of trades for settlement and have policies and procedures that promote the automated 

transmission of messages among the relevant parties to a transaction to ensure timely settlement 

and reduce the potential for errors.   

The Commission recognizes it may not be technologically or operationally practicable to 

eliminate all manual processes immediately.  Indeed, in certain circumstances, the parties to a trade 

may need to engage in manual interventions to ensure the accuracy of trade information and 

minimize operational or other risks that may prevent settlement.  Rule 17Ad-27(a), as adopted, 

does not require CMSPs to remove a manual process if doing so would clearly undermine the 

prompt and accurate clearance and settlement of securities transactions.  However, where a CMSP 

continues to permit manual reconciliation or other types of human intervention, it generally should 

explain in its policies and procedures why those manual processes remain necessary as part of its 

systems and processes and initiate incremental steps to alleviate the need for any manual process.  

In addition, the CMSP should consider developing processes that ultimately would eliminate the 

underlying issues that drive the use of manual processes in order to facilitate a more automated and 

STP-focused approach. 

2. New Rule 17Ad-27(b) - Annual Report  

                                                 

which may not be under the CMSP’s control.  See DTCC ITP April Letter, supra note 216, at 7.  

As discussed above, the Commission is not advocating the elimination of ETC to the extent that its 

use does not impede the development of STP at the CMSP.  In the event that use of the ETC is 

impeding STP, CMSPs generally should use their expertise to develop an appropriate methodology 

and timeframe to transition away from the use of such ETC. 



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The Commission is retaining the general requirement under proposed Rule 17Ad-27 to 

require a CMSP to submit a report every twelve months to the Commission that includes specified 

qualitative and quantitative information used to assess the CMSP’s progress in facilitating STP 

during the twelve-month period covered by the annual report.  However, as explained in more 

detail below, the Commission is making one substantive and several technical modifications to the 

final rule, as adopted.  The purpose of these modifications is to require the CMSPs to disclose 

qualitative and quantitative information in the annual report.  The Commission continues to 

believe that the annual report component of Rule 17Ad-27(b), as adopted, will enable the 

Commission to (i) assess the qualitative and quantitative progress made by the CMSP and its users 

to further STP efforts in the processing of institutional transactions; (ii) evaluate the need for 

additional regulatory action; and (iii) further its oversight of, and the development of, the national 

clearance and settlement system. 

The Commission is retaining the 12-month reporting timeframe requirement, as proposed, 

for the annual report under new Rule 17Ad-27(b) for several reasons.  First, a yearly review on 

progress with respect to the CMSP’s efforts to facilitate STP should be a sufficient timeframe in 

which the CMSP is able to consider, develop, and implement iterative improvements over time on 

a forward-looking basis, while also ensuring that progress towards STP is describable, 

measureable and implemented as expeditiously and prudently possible.  Second, a twelve month 

period would provide the CMSP with a sufficient look-back period to complete a meaningful 

review on an organization-wide basis and time to test the efficacy of any material changes to 

technologies and procedures in the preceding year.   

Third, an annual reporting requirement, as opposed to a monthly or semi-annual 

requirement, should help ensure that the information provided to the Commission reflects 



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meaningful and substantive progress by the CMSP, as opposed to focusing attention on smaller, 

technical changes in services and policies that would be less relevant or less informative to the 

CMSP, its users, the Commission, or the public as to their understanding of the overall progress 

towards achieving straight-through processing by the CMSP.  And fourth, the Commission 

believes that the annual report requirement, as now structured in adopted Rule 17Ad-27, would 

enable the Commission to evaluate actions taken by the CMSP to ensure compliance with the rule 

and to help fulfill the Commission’s responsibility for oversight of the national clearance and 

settlement system, both as it relates to the CMSP specifically and the national system more 

generally.   

New Rule 17Ad-27(b) also retains the general requirement to provide both qualitative and 

quantitative information in the annual report, as proposed.  The Commission believes that both 

types of analysis are necessary to better explain the current operational environment relative to 

STP development and the obstacles preventing further STP development, and to provide 

appropriate context to the metrics, from a current as well as a retrospective and prospective 

viewpoint.  Moreover, the qualitative aspects of the requirements under paragraph (b) will provide 

the Commission with the CMSP’s expertise in the assessments and analysis of its STP progress, 

providing additional context for the quantitative data required in the annual report. 

The Commission also is retaining the provision making the annual report required under 

adopted Rule 17Ad-27(b) publicly available on its website to enable the public to review and 

analyze progress on achieving STP.385  As discussed in the T+1 Proposing Release and detailed 

                                                 
385  DTCC ITP indicated in its comment letter that it is considering publishing the annual report 

on its website to provide the public with ready access to the information.  See DTCC ITP 

September Letter, supra note 325, at 4. 



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below, to the extent that an annual report includes confidential commercial or financial 

information, a CMSP can request confidential treatment of those specific portions of the report.386 

To clarify that the content of the annual report requirement is distinct from the policies and 

procedures requirement (discussed above), the annual report requirement is now designated as new 

paragraph (b) under the adopted Rule 17Ad-27.  Specifically, new Rule 17Ad-27(b), as adopted, 

requires a clearing agency that provides a central matching service for transactions involving users 

to submit to the Commission every twelve months a report that includes five component 

requirements, now delineated as Rule 17Ad-27(b)(1) through (5).  Paragraphs (b)(1), (2), and (5) 

include modified versions of the proposed requirements under proposed Rule 17Ad-27(a), (b), and 

(c).  In addition, new paragraph (b) includes paragraphs (b)(3) and (4) which detail the data 

elements required in the report, consistent with the discussion in the T+1 Proposing Release but 

not specified in the rule text as proposed.387  In particular, paragraphs (b)(3) and (4) incorporate the 

substance of the recommendations made by DTCC ITP requesting more specificity for the data 

required to be included in the report under the rule.388  The Commission believes that these 

changes are consistent with its intent as to the contents and objective of the annual report, as 

proposed, and should provide beneficial clarity to CMSPs regarding their obligations under these 

provisions. 

                                                 
386  See 17 CFR 240.24b-2. 

387  A CMSP generally should include in its report a summary of key settlement data relevant 

to its STP objective, such as data related to the rates of allocation, confirmation, affirmation, 

and/or matching achieved via straight-through processing.  See T+1 Proposing Release, supra note 

2, at 10459. 

388  See DTCC ITP September Letter, supra note 325, at 2–3.  



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The Commission is also amending paragraph (b) to delete the phrase “for transactions 

involving broker-dealers and their customers” for the same reason it deleted the text in paragraph 

(a), as discussed in Part V.C.1.   

a) New Rule 17Ad-27(b)(1) – Summary of Policies and Procedures  

The first of the five components under adopted Rule 17Ad-27(b) requires the CMSP to 

provide pursuant to new paragraph (b)(1) a summary of its policies and procedures required under 

adopted Rule 17Ad-27(a), current as of the last day of the twelve month period covered by the 

report.  The Commission is making a technical change to paragraph (b)(1) to clarify that only a 

“summary” of the CMSP’s policies and procedures current as of the last day of the twelve month 

period covered by the report need be included in the report, and not the policies and procedures in 

their entirety or policies and procedures current under any other timeframe.389  Today, CMSPs’ 

policies and procedures are not publicly available.  By providing a summary of the CMSPs 

policies and procedures, the Commission, indirect CMSP users, and the public will be able to 

understand at a high level the important aspects of the CMSP’s operations and systems, which the 

Commission anticipates will in turn facilitate market-wide discussions regarding the adoption of 

more efficient post-trade processing generally and within the context of using CMSPs for some or 

all of a market participant’s post-trade processing needs specifically.  Moreover, this information 

should help readers of the annual report to be better able to analyze other aspects of the annual 

report, particularly those related to the quantitative and forward-looking qualitative information 

required under the rule, as adopted.   

                                                 
389  Proposed Rule 17Ad-27(a) required that the annual report must include “[I]t’s current 

policies and procedures for facilitating straight-through processing.”  T+1 Proposing Release, 

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The summary description of the CMSP’s policies and procedures required by paragraph 

(b)(1) generally should provide a brief overview of the policies and procedures developed pursuant 

to new Rule 17Ad-27(a).  To the extent applicable, the scope of the summary generally should 

focus on those aspects of the CMSP’s policies and procedures that describe and explain its 

operations, systems, services, and user obligations generally and those aspects of its policies and 

procedures that facilitate STP-oriented operations or systems specifically, including any material 

changes made to the relevant policies and procedures during the reporting period.  Because the 

Commission will make the report publicly available, it would be helpful for a CMSP to orient the 

information contained in the summary to market participants that engage in the post-trade 

processing of securities transactions to help ensure that the report is useful and informative to both 

existing and potential users.  

b) New Rule 17Ad-27(b)(2) – Qualitative Description of STP 

Progress 

The second component of the annual report under adopted Rule 17Ad-27(b) requires the 

CMSP to provide pursuant to new paragraph (b)(2) a qualitative description of the CMSP’s 

progress in facilitating STP during the twelve-month period covered by the report required under 

paragraph (b)(1).  The Commission is modifying the proposed requirement, formerly in proposed 

Rule 17Ad-27(b), to add the text “qualitative description” in new paragraph (b)(2) to clarify the 

type of information required in the CMSP’s description of its progress in facilitating STP during 

the period covered by the report and to assist CMSP compliance with this provision of the rule.   

The qualitative report required under paragraph (b)(2) will provide the Commission and the 

public with an understanding of the specific actions the CMSP has taken over the twelve-month 

period covered by the report to facilitate STP.  To the extent practicable, the Commission 

encourages CMSPs to use their expertise to include their assessment of the impact of any actions 



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discussed in the qualitative section of the report on the furtherance of its STP efforts, both as it 

relates to the CMSP specifically and the markets generally.  The Commission and CMSP users 

will use this information to better understand the CMSP’s STP initiatives, as well as encourage 

market participants to begin analyzing their own internal systems and operations to develop and 

incorporate more STP-oriented mechanisms themselves.  In addition, the qualitative report 

required under this provision should also help inform an analysis of the quantitative data required 

under new Rule 17Ad-27(b)(3) and (4) by providing context for the metrics regarding the efficacy 

of the CMSP’s actions to facilitate STP.   

A qualitative description of the CMSPs progress during the twelve month period covered 

by the report generally should describe the services and systems used during the period covered by 

the report that illustrate the CMSP’s progress in facilitating STP, as well as any applicable analysis 

or additional information that aids in understanding or supporting the qualitative description.  This 

qualitative description should generally focus on the CMSP’s progress in facilitating STP with 

respect to the processes used in the allocation, confirmation, affirmation, and matching of 

institutional trades, the communication of messages among the parties to the transactions, and the 

availability of service offerings that reduce or eliminate the need for manual processing.  However, 

the CMSP should consider including any reasonable and applicable indicia of STP progress to 

supplement their descriptions under paragraph (b). 

As is the case with other provisions of adopted Rule 17Ad-27(b), the qualitative description 

submitted pursuant to Rule 17Ad-27(b)(2) in the first reporting period may benefit from a more 

robust discussion of the current systems used by the CMSP in order to put a discussion of its STP 



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progress in context.390  However, the qualitative description in subsequent annual reports should 

generally be able to build on the initial report by relying on any background or foundational 

information provided in the initial reporting period, and instead focus primarily on the current 

year’s progress. 

c) New Rule 17Ad-27(b)(3) – Quantitative Data  

The third component of the annual report required under adopted Rule 17Ad-27(b) requires 

the CMSP to include pursuant to new paragraph (b)(3) a quantitative presentation of data that 

specifies five sets of data.  The Commission concurs with DTCC ITP’s recommendation that any 

requirements to include specific data in the annual report should be expressly included in the rule 

text. 391  While DTCC ITP recommended specifying in the rule certain categories of data, the 

Commission is opting to break down those categories into the specific data elements described in 

paragraph (b)(3).392  Specifying the particular data and metrics will promote the capture of 

specific, standardized data points relevant to advancing the straight-through processing objective, 

which should enable more effective comparison and analysis of the data year over year and as 

between CMSPs.  While requiring specific data elements removes some of the CMSP’s discretion 

under the rule to determine how best to quantify advancements related to straight-through 

processing, the Commission believes that requiring the specific data elements in paragraph (b)(3) 

                                                 
390  For more information related to the content and filing of the initial and subsequent annual 

reports pursuant to adopted Rule 17Ad-27(c), see infra Part V.C.3. 

391  See DTCC ITP April Letter, supra note 216, at 12; DTCC ITP September Letter, supra 

note 325, at 2–3. 

392  See DTCC ITP September Letter, supra note 325, at 2–3. 



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is necessary to understand existing market dynamics and, as noted above, to facilitate comparisons 

across CMSPs and over time.   

Accordingly, the Commission is modifying the proposed annual report requirement to add 

a quantitative data requirement under paragraphs (b)(3)(i) through (v) specifying the key metrics 

related to the processing of securities transactions at CMSPs that are required in the annual 

report.393  Specifically, Rule 17Ad-27(b)(3) requires the CMSP to provide data that includes: (i) 

the total number of trades submitted to the clearing agency for processing; (ii) the total number of 

allocations submitted to the clearing agency; (iii) the total number of confirmations submitted to 

the clearing agency, as well as the total number of confirmations cancelled by users; (iv) the 

percentage of confirmations submitted to the clearing agency that are affirmed on trade date, 

specifying to the extent practicable the time of affirmation on trade date; (v) the percentage of 

allocations and confirmations submitted to the clearing agency that are matched and automatically 

confirmed through the clearing agency’s services; and (vi) metrics concerning the use of manual 

and automated processes by the CMSP’s users with respect to the CMSP’s services that may be 

used to assess progress in facilitating STP.  The data required under this provision should provide 

baseline information and insight into CMSP’s progress with regard to facilitating STP, CMSP user 

                                                 
393  In its initial comment letter, DTCC ITP recommended that the annual report should require 

the quantitative data in lieu of the policies and procedures and qualitative description requirements.  

See DTCC ITP April Letter, supra note 216, at 12.  DTCC ITP also recommended that the 

quantitative aspects of the report should include specified metric categories, in which DTCC ITP 

suggested specific types of data that should be included in those metric categories.  See DTCC ITP 

September Letter, supra note 325, at 2.  As discussed above, the Commission is opting to require 

specific data requirements under adopted Rule 17Ad-27(b), in lieu of metric categories.  See supra 

notes 391–392 and accompanying text.  Most of the data elements incorporated into Rule 17Ad-

27(b)(2) and (3) reflect the recommendations made by DTCC ITP.  See DTCC ITP September 

Letter, supra note 325, at 2–3. 



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performance, and potential indications of specific impediments in improving efficiencies in the 

post-trade processing environment.   

Although the metrics required under paragraphs (b)(3)(i) through (v) will provide a high-

level view of certain functions at the CMSP, the Commission believes this data will objectively 

demonstrate trends with regard to automation, manual intervention and overall progress towards 

STP and may provide indications of certain systemic or operational issues impeding the CMSP’s 

STP progress.  Defining the specific metrics required in the annual report should also have the 

effect of promoting consistencies across reporting periods at a single CMSP and across multiple 

CMSPs, which should in turn improve the Commission’s and the public’s ability to analyze the 

data over time.  The Commission considers the data requirements under paragraph (b)(3) to be the 

key information necessary to analyze the CMSP progress in facilitating STP.  In the event the 

CMSP determines that additional data is necessary or would be helpful to support its qualitative 

descriptions required under Rule 17Ad-27(b)(2) or (5), the Commission encourages the CMSP to 

include such additional quantitative data under paragraph (b)(3). 

With regard to metrics concerning the use of manual and automated processes by the 

CMSP’s users with respect to the CMSP’s services that are indications of progress in facilitating 

STP, as required under paragraph (b)(3)(vi), the Commission has not specified the type of metrics 

that should be used to comply with this provision of the new rule.  CMSPs are encouraged to 

design metrics specific to their services and users that would best indicate whether users are in fact 

using manual processes for allocations, confirmations or other processing activities and whether 

over time these users have migrated to an automated processing that replaced their use of manual 

processing.  For example, DTCC ITP cited to the use of SSI metrics as one such measure, which 

could provide details on the quality of SSIs established at the CMSP, the use of such SSIs by its 



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users in the actual processing stream, and automation of SSIs as possible indicators of STP 

improvements.394   

Given that the data required under paragraph (b)(3)(vi) is one of the core measurements 

central to the objective of Rule 17Ad-27, the Commission encourages CMSPs to design these 

metrics to be as expansive and granular as reasonably feasible, to better provide a detailed view of 

the STP progress, and to adjust such metrics as necessary to accommodate the onboarding of new 

services, technologies or operations.  Retaining sufficient continuity year-to-year in the CMSP’s 

metrics could ensure year-over-year measurability of the STP progress made during the time 

period covered by any particular annual report.  Any new metrics added to an annual report 

covering a particular twelve month period due to a change in the CMSP’s services, operations or 

systems could be discussed in the qualitative description required under new Rule 17Ad-27(b)(5).  

d) New Rule 17Ad-27(b)(4) – Quantitative Data Organization and 

Categorization 

The fourth component of the annual report requires the CMSP to submit, pursuant to Rule 

17Ad-27(b)(4), the data sets required by paragraph (b)(3) in the following manner:  (i) organized 

on a month-by-month basis beginning with January of each year, for the twelve months covered by 

the report required under paragraph (b) of the rule; (ii) separated, where applicable, between the 

use of central matching and electronic trade confirmation services offered by the clearing agency; 

(iii) separated, as appropriate, by asset class; (iv) separated by type of user; and (v) presented on an 

anonymized and aggregated basis.395   

                                                 
394  See DTCC ITP September Letter, supra note 325, at 3 for more detail on DTCC ITP’s 

comments related to data requirements in the annual report.   

395  To support transparency around the role and utility of CMSPs and objectively demonstrate 

trends toward more automation and STP progress, DTCC ITP recommended in its comment letter 



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The Commission agrees with DTCC ITP that further distinguishing any required data sets 

by asset class, type of CMSP service used, user type, and presented on an anonymized and 

aggregated basis, should better demonstrate automation trends and STP progress.  The 

Commission also believes that further subcategorizing the required data as now required under 

adopted Rule 17Ad-27(b)(4) enables more thorough and useful analysis of the progress toward 

STP and helps identify potential hindrances in achieving full STP.396  Organizing each of the data 

sets required under paragraph (b)(3) to further divide the data on a month-by month basis, and to 

identify the submission of trades by entity type (i.e., ETC versus matching), user type, and asset 

class should assist in the Commission’s and the public’s analysis of the data and more precise 

identification of any potential sources of issues hindering STP progress.  Moreover, the 

identification of certain subcategories should apprise users and their customers of any issues raised 

by the data that is specifically applicable to a particular user.   

The Commission understands that there may be circumstances when the identification of a 

particular data set does not lend itself to further subcategorization under paragraph (b)(4)(ii) 

requiring CMSP service type designation or paragraph (b)(4)(iii) requiring asset class designation.  

This may be particularly true as CMSPs services and technology evolve to accommodate 

improvements or changing business or market conditions.  For example, a CMSP’s ETC or 

matching service may not perform certain functions that are subject to the data set requirements 

                                                 

that the Commission amend proposed Rule 17Ad-27 to include a specific requirement for reporting 

quantitative data on an anonymized and aggregated level for rates of allocation, confirmation, 

affirmation, and/or matching that a CMSP has achieved via STP and distinguishing trade 

information by asset class, type of processing service (i.e., ETC versus matching), and “customer 

segment” (referred to as “user type” in Rule 17Ad-27, as adopted).  See DTCC ITP September 

Letter, supra note 325, at 2. 

396  See id. 



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under paragraph (b)(3).  Similarly, a specific CMSP function may involve multiple asset classes 

and, as a result, may be difficult to parse out in a manner that would aid an analysis of the 

information or aid in assessing STP progress.  In those cases, the CMSP generally should use 

reasonable efforts to organize the data sets in a manner that best informs the Commission, CMSP 

users, and the public as to the current and future status of the CMSP’s progress in facilitating STP 

at the CMSP. 

To the extent applicable and feasible, subcategorizing data required under paragraph (b)(3) 

by user type generally should include those entities that are directly interfacing with the CMSP to 

facilitate allocation, confirmation, affirmation or matching functions for themselves or their 

clients.  Such entities may include investment managers, broker-dealers (in their capacity as 

executing or prime broker-dealers), and custodians.  However, to the extent that other user types, 

including indirect users of CMSP services, can be identified and distinguished in the data sets 

required under paragraph (b)(3), the CMSP could consider including those categorizations as well 

if such information would benefit an analysis of the required data.   

The Commission is also adopting new Rule 17Ad-27(b)(4)(v) which requires the 

information to be presented on an anonymized and aggregated basis.397  Given that the annual 

report has information that the Commission believes should be available to the public, and that the 

Commission would likely sustain a confidential treatment request under 17 CFR 240.24b-2 by the 

CMSP for sensitive, proprietary and confidential data included in the annual report,398 the contents 

of the annual report need to be anonymized and aggregated.  

e) New Rule 17Ad-27(b)(5) – Qualitative Description of STP 

                                                 
397  See id.; see also DTCC ITP April Letter, supra note 216, at 12. 

398  See 17 CFR 240.24b-2. 



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Facilitation 

The fifth component of the annual report under Rule 17Ad-27(b) requires the CMSP to 

provide pursuant to new paragraph (b)(5) a description of the actions the CMSP intends to take to 

further facilitate STP of securities transactions at the clearing agency during the twelve-month 

period that follows the period covered by the report.  The Commission is adopting this provision 

generally as proposed, but is making one modification to the proposed rule text by replacing the 

text “[T]he steps” in proposed Rule 17Ad-27(c) with the text “a description of the actions” in new 

paragraph (b)(5).  This modification will facilitate a more detailed description of the CMSP’s 

actions to facilitate STP in the upcoming twelve months.   

The purpose of paragraph (b)(5) is two-fold.  First, the provision is intended to inform the 

Commission, CMSP users and market participants generally as to the CMSP’s intended actions to 

facilitate STP in the upcoming year.  The Commission anticipates that advance notice of a CMSP’s 

intentions to take certain actions oriented toward STP development may allow other market 

participants to make the necessary changes to accommodate the CMSP’s activities and may 

facilitate innovation to improve other aspects of the post-trade processing environment external to 

the CMSP, some of which may encourage or allow for future improvements at the CMSP. 

Second, new paragraph (b)(5) is intended to encourage CMSPs to develop a culture of 

focusing on enabling a fully automated STP environment as it considers future developments of its 

services, operations, and business model.  The Commission believes that the CMSP can and should 

be a leading force in encouraging the development of more efficient, automated, and STP-focused 

systems in post-trade processing market-wide.  While the CMSP does not have control over 

actions taken or services utilized by its users and their customers, the actions it takes to provide 

and promote STP services and capabilities at the CMSP level should have a direct impact on its 

users’ and an indirect impact on its users’ customers with respect to future developments of their 



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individual internal operations and systems, as well as an impact on the state of post-trade 

processing within the market as a whole.   

In describing the actions it intends to take in the twelve-month period following the period 

covered by the annual report as required under new Rule 17Ad-27(b)(5), the CMSP should 

generally consider including any material changes that it intends to make with respect to its 

policies, procedures, operations, systems or services that relate to the furtherance of facilitating 

STP.  While paragraph (b)(5) requires the CMSP to identify those actions the CMSP will in fact 

implement during the required timeframe, the CMSP should also consider including those actions 

that have a high degree of likelihood of being implemented during the timeframe.  To the extent 

practicable and related to STP development, the CMSP should also consider including a summary 

of the underlying rationale as to why the CMSP intends to take a particular action required to be 

described under paragraph (b)(5) and a description of the expected impact of any such action or 

actions as it relates to the CMSP’s facilitation of STP. 

The Commission anticipates that the metrics required under new Rule 17Ad-27(b)(3) 

should help inform the CMSP and shape future considerations by providing data that evidences 

whether progress has made in moving toward full STP during the period covered by the preceding 

year and what if any obstacles remain that should be analyzed and addressed in future iterations of 

its services and operations.  For example, changes in manual touch rates by user type may indicate 

issues that can and should generally be addressed on a policy or systems basis to reduce those 

rates.  From a qualitative perspective, CMSPs should consider reviewing their operations on a 

system-wide basis to design future solutions to address the use of manual processes or automated 

process that result in manual intervention, with the goal of reducing or eliminating the use of such 

processes. 



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3. New Rule 17Ad-27(c) – Timing of Filing Annual Report 

The Commission is adopting new Rule 17Ad-27(c) to require that the annual report 

required under Rule 17Ad-27(b) must be filed with the Commission within 60 days of the end of 

the twelve-month period covered by the report, and the twelve month period covered by each 

report must commence on January 1 of the calendar year.399  The Commission believes that 

requiring the filing of the annual report within 60 days of the end of the twelve month period 

covered by the report is an appropriate amount of time because it balances the competing interests 

of providing the CMSPs sufficient time to compile the data and descriptions required under new 

Rule 17Ad-27(b) and providing sufficiently recent and relevant data for the Commission and 

public review and analysis.  Moreover, CMSPs may choose to plan and compile the contents of the 

annual report throughout the reporting year as new relevant data and information becomes 

available, in part because the CMSPs already provide on a monthly basis some data contemplated 

in the annual report pursuant to the terms of the exemptive orders.  Based on the Commission’s 

experience in requiring other types of clearing agencies to provide financial statements within sixty 

days of the end of the year,400 the Commission believes a 60-day period would provide the CMSP 

                                                 
399  DTCC ITP recommended that the Commission should provide further clarification as to 

when CMSPs would be required to submit their initial annual report to the Commission, as well as 

the time period applicable to the actual content to be included in initial annual report.  DTCC ITP 

raised concerns that depending on when the initial report was due, the variance in pre and post T+1 

implementation data could result in unclear analysis of STP progress.  See DTCC ITP September 

Letter, supra note 325, at 3.  The Commission believes DTCC ITP’s concern is addressed, 

regardless of the time period covered by the initial or subsequent annual reports or whether the 

data reflects pre or post T+1 implementation, because the data will be presented on a month-by-

month basis pursuant to new Rule 17Ad-27(b)(4)(i), and therefore amenable to an analysis on any 

timeframe. 

400  See, e.g., 17 CFR 240.17Ad-22(c)(2).  In the post-trade environment more generally, the 

Commission also requires security-based swap data repositories to file an annual report with the 

Commission within sixty days of the end of the fiscal year.  See 17 CFR 240.13n-11. 



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sufficient time to compile and complete the remaining portions of the report and seek the 

appropriate internal approval to file the report with the Commission. 

The Commission is also requiring that the time period covered by the annual report contain 

information relevant to the requirements under new paragraph (b) of Rule 17Ad-27 from January 1 

through December 31 of each calendar year.  By synchronizing the submission the annual reports 

to a uniform time frame across all CMSPs, the Commission, CMSP users, and the public will be 

able to better analyze the data and assess compliance with the rule and progress of the CMSPs, on 

an individual CMSP level and across all CMSPs, in facilitating STP.  In the event there is a partial 

year on the first year a CMSP is obligated to comply with Rule 17Ad-27(b), then the CMSP should 

generally file its first annual report to cover that partial year through December 31 of that year.401   

4. New Rule 17Ad-27(d) - Filing Annual Report in EDGAR and 

Confidentiality Issues 

The Commission is adopting as proposed the provision under proposed Rule 17Ad-27 that 

requires CMSPs to file the annual report on EDGAR.402  Pursuant to new Rule 17Ad-27(d), a 

CMSP is required to submit its annual report to the Commission using EDGAR, and tag the 

information in the report using the structured (i.e., machine-readable) Inline XBRL data language.  

Specifically, Rule 17Ad-27(d) requires that the report required under paragraph (b) of the new rule 

                                                 
401  For example, the compliance date for adopted Rule 17Ad-27 is May 28, 2024.  See infra 

Part VII.D.  The first annual report will cover the time period from April 1, 2024, through 

December 31, 2024. 

402  DTCC ITP did not comment on the use of EDGAR to file the proposed annual report, but 

did mention in the context of filing on EDGAR that it was considering publishing the annual report 

on its website.  See DTCC ITP September Letter, supra note 325, at 3.   



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be filed electronically on EDGAR and must be provided as interactive data as required by 17 CFR 

232.405 (“Rule 405 of Regulation S-T”) in accordance with the EDGAR Filer Manual.403   

Using EDGAR will provide the Commission and the public with a centralized, publicly 

accessible electronic database for the reports, facilitating the use of the reported data on straight-

through processing.  Moreover, requiring Inline XBRL tagging of the reported disclosures, which 

would specifically include an Inline XBRL block text tag for each of the required narrative 

disclosures as well as detail tags for individual data points, should make the disclosures more 

easily available and accessible to and reusable by market participants and the Commission for 

retrieval, aggregation, and comparison across time periods for a single CMSP or across different 

CMSPs and time periods.404  Detail tags will also be helpful relative to the disclosure in the annual 

report of individual data points, including the rates of allocation, confirmation, affirmation, and/or 

matching achieved via straight-through processing.  As a general matter, incorporating submission 

via EDGAR and requiring Inline XBRL tagging under Rule 17Ad-27 will facilitate access to data 

included in reports submitted pursuant to the rule in a manner that is machine-readable, human-

                                                 
403  See 17 CFR 232.101 and 232.405.  In a non-substantive change from the proposal, rather 

than adding new 17 CFR 232.409 (“Rule 409 of Regulation S-T”), the Commission is expanding 

Rule 405 of Regulation S-T to effectuate the Inline XBRL requirement.  This approach will be 

consistent with other Commission rulemakings that have featured Inline XBRL requirements.  See, 

e.g., Exchange Act Release No. 95607 (Aug. 25, 2022), 87 FR 55134, 55196 (Sept. 8, 2022). 

404  See Exchange Act Release No. 10514 (June 28, 2018), 83 FR 40846, 40847 (Aug. 16, 

2018).  Inline XBRL allows filers to embed XBRL data directly into an HTML document, 

eliminating the need to tag a copy of the information in a separate XBRL exhibit.  Id. at 40851.  

Using Inline XBRL as compared to an unstructured PDF, HTML, or ASCII format requirement for 

the reports would facilitate analysis of the information contained therein.  Id.  With respect to the 

metrics concerning the use of manual and automated processes by a CMSP’s users required under 

paragraph (b)(3)(vi)—which may vary across CMSPs—the Commission anticipates that the tagged 

data will facilitate useful comparisons over time at a particular CMSP, even though it may 

facilitate only limited comparisons across CMSPs.  



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readable, and accessible via application programming interface where appropriate.405  In the 

Commission’s view, the Inline XBRL tagging requirement will facilitate efficient analysis of 

information that CMSPs include in their annual reports, providing CMSP users (e.g., institutional 

investors and broker-dealers acting on behalf of institutional investors) and the general public 

greater insight into policies and procedures, progress, quantitative data, and qualitative 

descriptions related to straight-through processing. 

As discussed in the T+1 Proposing Release, the Commission will make the annual report 

required under adopted Rule 17Ad-27(b) publicly available on its website to enable the public to 

                                                 
405  These considerations are consistent with objectives of the recently enacted Financial Data 

Transparency Act (“FDTA”), which concerns the manner in which the Commission collects and 

disseminates information.  The FDTA was signed into law on December 23, 2022, as Title LVIII 

of the James M. Inhofe National Defense Authorization Act for Fiscal Year 2023.  See James M. 

Inhofe National Defense Authorization Act for Fiscal Year 2023, Pub. L. 117-263 (Dec. 23, 

2022).Pub. L. 117-263, 136 Stat. 2395 (2022).  Section 5811 of the FDTA directs the Commission 

and other covered agencies (e.g., financial regulators) to jointly issue proposed rules for public 

comment that establish data standards for the collections of information reported to each covered 

agency by financial entities and for the data collected from covered agencies on behalf of the 

Financial Stability Oversight Council.  The data standards must meet specified criteria relating to 

openness and machine-readability and promote interoperability of financial regulatory data across 

members of the Financial Stability Oversight Council.  In addition, section 5822 of the Financial 

Data Transparency Act requires that all public data assets published by the Commission under the 

securities laws and the Dodd-Frank Act be made available in accordance with specified criteria 

relating to openness and machine-readability.  Section 5811 of the FDTA directs the Commission 

and other covered agencies (e.g., financial regulators) to jointly issue proposed rules for public 

comment that establish data standards for the collections of information reported to each covered 

agency by financial entities and for the data collected from covered agencies on behalf of the 

Financial Stability Oversight Council.  The data standards must meet specified criteria relating to 

openness and machine-readability and promote interoperability of financial regulatory data across 

members of the Financial Stability Oversight Council.  In addition, section 5822 of the Financial 

Data Transparency Act requires that all public data assets published by the Commission under the 

securities laws and the Dodd-Frank Act be made available in accordance with specified criteria 

relating to openness and machine-readability.  See 44 U.S.C. 3502(20) (defining the term “open 

Government data asset” to mean, among other things, machine-readable and available (or could be 

made available) in an open format). 



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review and analyze data regarding, and progress towards, straight-through processing.406  The 

public availability of the annual report would help inform the public, particularly the direct and 

indirect users of CMSPs, as to the progress being made each year to advance implementation of 

STP with respect to the allocation, confirmation, affirmation, and matching of institutional trades, 

the communication of messages among the parties to the transactions, and the availability of 

service offerings that reduce or eliminate the need for manual processing.  In addition, allowing for 

additional transparency may facilitate innovation in the public forum as to how CMSPs may 

improve their systems and services to improve STP specifically, and the institutional processing 

environment generally.  

The Commission does not believe the annual report requires the inclusion of proprietary 

information, trade secrets, or personally identifiable information.  To the extent that an annual 

report includes confidential commercial or financial information, a CMSP could request 

confidential treatment of those specific portions of the report.407 

VI. Impact on Certain Commission Rules, Guidance, and SRO Rules 

The Commission stated in the T+1 Proposing Release that the proposed rules and rule 

amendments may affect compliance with other existing Commission rules and guidance that 

reference the settlement cycle or settlement processes.  The Commission identified a preliminary 

list of rules that could be affected by a move to a T+1 standard settlement cycle, determined that 

changes to those rules were not necessary, and solicited comment regarding the potential impact of 

                                                 
406  DTCC ITP has indicated that it is considering publishing the report on its website, where it 

believes that the public will have ready access to the information.  See DTCC ITP September 

Letter, supra note 325, at 3. 

407  See 17 CFR 240.24b-2. 



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a T+1 settlement cycle.  In response, several commenters identified elements of Commission rules, 

as well as existing Commission guidance, exemptive relief related to those rules, and staff no-

action letters,408 that may be impacted by shortening the standard settlement cycle to T+1. 

A. Regulation SHO 

In the T+1 Proposing Release, the Commission identified provisions of Regulation SHO 

under the Exchange Act that may be impacted by the adoption of a T+1 standard settlement cycle.  

Certain provisions of Regulation SHO use “trade date” and “settlement date” to determine the time 

frames for compliance relating to sales of equity securities and fails to deliver on settlement date.  

These references are not to a particular settlement cycle (e.g., T+2); however, the time frames for 

these provisions can change in tandem with changes in the standard settlement cycle.409  The 

Commission received the following comments regarding Regulation SHO.   

One commenter stated its belief that the Commission should reevaluate the deadlines under 

Rule 204 in the context of a T+1 settlement cycle.410  The commenter expressed concern that 

moving to T+1 would reduce the time available for a bona fide market maker411 to close out fail-

to-deliver positions and could adversely impact the liquidity role those market makers provide.   

                                                 
408  Staff reports, Investor Bulletins, and other staff documents (including those cited herein) 

represent the views of Commission staff and are not a rule, regulation, or statement of the 

Commission.  The Commission has neither approved nor disapproved the content of these staff 

documents and, like all staff statements, they have no legal force or effect, do not alter or amend 

applicable law, and create no new or additional obligations for any person. 

409  See T+1 Proposing Release, supra note 2, at 10444 (discussing the potential impacts of a 

T+1 standard settlement cycle on the closeout of a fail-to-deliver position under 17 CFR 242.204 

(“Rule 204”) and the application of 17 CFR 242.200(g) (“Rule 200(g)”)). 

410  See Virtu Financial Letter, supra note 16, at 3. 

411  Under Regulation SHO’s bona fide market making exceptions, the broker-dealer generally 

should be holding itself out as standing ready and willing to buy and sell the security by 



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As discussed in the T+1 Proposing Release,412 shortening the standard settlement cycle to 

T+1 would reduce the time frames to effect the closeout of most types of fail-to-deliver positions 

under Rule 204.413  The applicable closeout date for a fail-to-deliver position can differ depending 

on its Rule 204 categorization, including whether it results from a short sale, a long sale, or bona 

fide market making activity.  If a fail-to-deliver position results from bona fide market making 

activity, the participant must close out the fail-to-deliver position by no later than the beginning of 

regular trading hours on the third consecutive settlement day following the settlement date.  Under 

the current T+2 standard settlement cycle, the closeout for long sales or bona fide market making 

activity is required by the beginning of regular trading hours on T+5.  If the Commission adopts a 

T+1 standard settlement cycle, this closeout requirement would be shortened from T+5 to T+4.   

                                                 

continuously posting widely accessible quotes that are near or at the market.  The market maker 

must be at economic risk for such quotes.  See Exchange Act Release No. 58775 (Oct. 14, 2008), 

73 FR 61690, 61699 (Oct. 17, 2008) (“2008 Regulation SHO Amendments”); see also Exchange 

Act Release No. 94524 (Mar. 28, 2022), 87 FR 23054, 23068 n.157 (Apr. 18, 2022) (“Dealer 

Release”) (“Broker-dealers that do not publish continuous quotations, or publish quotations that do 

not subject the broker-dealer to such risk (e.g., quotations that are not publicly accessible, are not 

near or at the market, or are skewed directionally towards one side of the market) would not be 

eligible for the bona-fide market-maker exceptions under Regulation SHO.  In addition, broker-

dealers that publish quotations but fill orders at different prices than those quoted would not be 

engaged in bona-fide market making for purposes of Regulation SHO.”).  Thus, a market-maker 

that continually executed short sales away from its posted quotes would generally be unable to rely 

on the bona-fide market making exceptions of Regulation SHO.  See Exchange Act Release No. 

50103 (July 28, 2004), 69 FR 48008, 48015 n.68 (Aug. 6, 2004).  Further, broker-dealers that 

publish quotations but fill orders at different prices than those quoted would not be engaged in 

bona fide market-making for purposes of Regulation SHO.  See, e.g., Dealer Release, supra note 

411, at 23068 n.157.  The market-maker must also be engaged in bona fide market making in that 

security at the time of the short sale for eligibility for the exceptions.  See 2008 Regulation SHO 

Amendments, supra note 411, at 61699. 

412  See T+1 Proposing Release, supra note 2, at 10461. 

413  A T+1 standard settlement cycle would reduce close out time frames for all Rule 204 fail-

to-deliver positions except those that fall within Rule 204(a)(2). 



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As explained above, most Rule 204 time frames automatically adjust to a new shortened 

settlement cycle, and the impact of such an alignment was considered during the rulemaking 

process for Rule 204 as well as during the proposal of the T+1 cycle.  Accordingly, given the time 

available to comply under a T+1 standard settlement cycle, the Commission does not believe that a 

reevaluation of the Rule 204 time frames is necessary at this time.414 

Two commenters addressed the impact of a T+1 settlement cycle to the application of Rule 

200(g)(1) as it pertains to loaned but recalled securities.  One commenter stated that the move to 

T+1 will shorten the recall period by one day and recommended that the Commission modify its 

interpretation in the Regulation SHO Adopting Release regarding the recall period to reflect this 

                                                 
414  As discussed in the T+1 Proposing Release, the time frame to recall a loaned security 

corresponds to the then current standard settlement cycle.  As the standard settlement cycle has 

been modified from T+3 to T+2 to T+1, the Commission has provided additional guidance 

regarding the probable time frame necessary to recall a loaned security so as to ensure timely 

delivery to close out a failure to deliver that may have occurred.  Extending the time frame to 

recall a loaned security further could result in failures to deliver not being closed out as is required 

by Rule 204 of Regulation SHO.  See T+1 Proposing Release, supra note 2, at 10461-62 (stating 

that previous guidance “was predicated on the Commission’s belief that, under then current 

industry standards, recalls for loaned securities would likely be delivered within three business 

days after the initiation of a recall.  In that case, a broker-dealer that initiated a bona fide recall by 

T+2 would receive delivery of loaned securities by T+5 and then be able to close out any failure to 

deliver on a “long” sale of the loaned but recalled securities by the beginning of regular trading 

hours on T+6, as then required by Rule 204 in a T+3 environment.”); see also T+2 Adopting 

Release, supra note 4, at 15578 (stating that “to the extent that customers have not made timely 

deliveries and have caused a fail to deliver by a broker-dealer, any indirect impacts on such 

customers are warranted,” and expressing specific concerns related to continued failures to deliver 

further: “In the Rule 204 Adopting Release, the Commission recognized that requiring broker-

dealers to close-out fails to deliver promptly after they occur may result in costs to certain 

participants, but believed that ‘such costs are limited and are justified by the fact that the rule will 

continue our efforts to achieve our goals of reducing fails to deliver by maintaining the reductions 

in fails to deliver achieved by the adoption of temporary Rule 204T, as well as other actions taken 

by the Commission, and addressing potentially abusive ‘naked’ short selling and, thereby help 

restore, maintain, and enhance investor confidence in the markets.’”). 



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shortened period.415  The other commenter stated that if the standard settlement cycle is shortened 

to T+1, the requirements under Rule 200(g) may result in a change in the timing by which a 

broker-dealer would need to initiate a bona fide recall of a loaned security to mark the sale of such 

loaned, but recalled, security “long” for purposes of Rule 200(g)(1).416  The commenter observed 

that some broker-dealers may have shortened the previous three business day recall period to two 

business days under the T+2 standard settlement cycle to ensure settlement on the proper 

settlement date.  The commenter explained that, in a T+1 environment, the recall period would be 

even shorter, which may limit securities lending participants’ ability to comply with these rules. 

The commenter recommended that, should the implementation of T+1 result in any changes to 

Regulation SHO, the Commission’s guidance regarding classification of the sale of a security that 

is on loan as “long” remain unchanged. 

In the T+1 Proposing Release, the Commission discussed the close-out scenarios under 

Regulation SHO in a T+1 environment and provided a figure to illustrate the timing.417  To satisfy 

the requirements of Rule 200(g), it was acknowledged that some broker-dealers may need to 

initiate a bona fide recall as early as trade date or may choose to modify securities lending 

agreements to shorten the recall period.  Such measures would need to be taken to meet the timing 

obligations under a T+1 cycle, and the Commission believes that such measures could facilitate the 

fulfillment of timing obligations without changing the requirements of Regulation SHO or related 

                                                 
415  See Fidelity Letter, supra note 16, at 7 (further explaining, “[w]hile we anticipate that in 

the early days of the transition to T+1, there may be an increase in fails to deliver, we believe that 

the Commission’s already robust regulatory framework minimizes instances in which a market 

participant may fail to deliver a security.”). 

416  See RMA Letter, supra note 16, at 4–5. 

417  See T+1 Proposing Release, supra note 2, at 10462. 



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guidance.  The industry used such measures to make a similar successful adjustment in the prior 

shortening of the settlement cycle from T+3 to T+2, and the Commission believes that such 

measures could again ensure compliance in a T+1 environment.  The Commission will continue to 

monitor the impact of a T+1 settlement cycle on the ability of broker-dealers to comply with Rule 

200(g). 

B. Delivery of Rule 10b-10 Confirmations and Prospectuses 

As discussed in the T+1 Proposing Release,418 Rule 10b-10 under the Exchange Act 

provides customers confirmations of transactions and serves a significant investor protection 

function.419  Rule 10b-10 does not directly refer to the settlement cycle,420 but instead requires that 

a broker-dealer “gives or sends” a customer a written confirmation disclosing specified 

information at or before “completion of the transaction.”421  

The Commission has considered how and when broker-dealers typically comply with the 

requirement to send out a Rule 10b-10 confirmation when changes have been made to the standard 

                                                 
418  See id. at 10463. 

419  17 CFR 240.10b-10. 

420   Rule 10b-10 was adopted in 1977 before the Commission adopted Rule 15c6-1, 

establishing the standard settlement cycle of T+3 in 1993.  See Exchange Act Release No. 13508 

(May 5, 1977), 42 FR 25318 (May 17, 1977). 

421  Generally, 17 CFR 240.15c1-1 (“Rule 15c1-1”) defines “completion of the transaction” to 

mean the time when: (i) a customer purchasing a security pays for any part of the purchase price 

after payment is requested or notification is given that payment is due; (ii) a security is delivered or 

transferred to a customer who purchases and makes payment for it before payment is requested or 

notification is given that payment is due; (iii) a security is delivered or transferred to a broker-

dealer from a customer who sells the security and delivers it to the broker-dealer after delivery is 

requested or notification is given that delivery is due; or (iv) a broker-dealer makes payment to a 

customer who sells a security and delivers it to the broker-dealer before delivery is requested or 

notification is given that delivery is due.  See 17 CFR 240.15c1-1(b).Conformed to Federal Register version 

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settlement cycle.  In 1993, when Rule 15c6-1 was initially adopted, the Commission was aware 

that broker-dealers typically sent out Rule 10b-10 customer confirmations on the day after trade 

date.422  By 2017, when the Commission shortened the standard settlement cycle from T+3 to T+2, 

the Commission had established a framework for electronic delivery of required information to 

investors.423  At that time, the Commission stated that, while broker-dealers may continue to send 

physical customer confirmations on the day after the trade date, broker-dealers may also send 

electronic confirmations to customers on the trade date.  The Commission also acknowledged that, 

in a T+2 settlement cycle, broker-dealers would have a shorter timeframe to send out the 

confirmation but did not believe that a shortened settlement cycle would create problems with 

regards to a broker-dealer’s ability to comply with Rule 10b-10.  When proposing T+1, the 

Commission expressed a similar belief that T+1 would not create a compliance issue for broker-

dealers under Rule 10b-10, although broker-dealers would again need to accommodate the 

shortened timeframes of T+1.424  The Commission solicited comment on the extent to which the 

T+1 rule proposals may impact compliance with Rule 10b-10. 

One commenter stated that broker-dealers have had challenges at times meeting the Rule 

10b-10 requirements under T+2, particularly for postal delivery such as in March 2020 at the 

beginning of the Covid-19 pandemic, and that the proposed compressed timeframe of T+1 will 

                                                 
422  See T+1 Proposing Release, supra note 2, at 10463. 

423  See, e.g., Exchange Act Release No. 37182 (May 9, 1996), 61 FR 24644 (May 15, 1996) 

(providing Commission views on electronic delivery of required information by broker-dealers, 

transfer agents, and investment advisers); see also T+1 Proposing Release, supra note 2, at 10643 

n.222. 

424  See T+1 Proposing Release, supra note 2, at 10463. 



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leave broker-dealers with even less time to correct minor delivery issues.425 Another commenter 

responded that shortening the settlement cycle to T+1 will make the delivery of physical 

confirmations no longer practical or feasible.426  However, as noted above, Rule 10b-10 requires 

that a broker-dealer “give or send” the confirmation prior to settlement; it does not require that the 

Rule 10b-10 confirmation be received prior to settlement.  Shortening the settlement cycle does not 

affect the ability of the broker-dealer to give or send Rule 10b-10 confirmations, and therefore 

does not impact a broker-dealer’s ability to comply with Rule 10b-10.  Accordingly, the 

Commission believes it is unnecessary to modify Rule 10b-10 to facilitate an effective transition to 

a T+1 standard settlement cycle.  In addition, to the extent that a broker-dealer and its customer 

would like to ensure that the customer receives Rule 10b-10 confirmation documents prior to 

settlement, as explained above and discussed further below, broker-dealers and their customers 

have the option to establish an arrangement for electronic delivery.  

The Commission requested comment on whether guidance regarding “delivery” for 

electronic confirmations under Rule 10b-10 needed to be updated to facilitate a T+1 standard 

settlement cycle.427  In the context of sending Rule 10b-10 confirmations and prospectus delivery 

obligations (discussed further below in Part VI.C), several commenters asked that the Commission 

consider, on a wider basis, making electronic delivery (“e-delivery”) the default method for 

                                                 
425  See letter from Kenneth E. Bentsen, Jr., President and Chief Executive Officer, Securities 

Industry and Financial Markets Association (Aug. 3, 2022), at 2 (“SIFMA August 3rd Letter”). 

426  See AGC April Letter, supra note 16, at 3. 

427  See T+1 Proposing Release, supra note 2, at 10463 n.222. 



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communicating with investors or customers.428   The Commission observes that broker-dealers 

already may use “e-delivery” to provide this information to investors.429  The Commission believes 

that considering widespread changes to e-delivery standards is not appropriate in the context of 

shortening the settlement cycle because it is not necessary to establish an e-delivery default to 

shorten the standard settlement cycle to T+1.  In a T+1 environment, no Commission rule would 

require the delivery of paper documentation by mail on T+1.  Moreover, the issues associated with 

e-delivery are complex and multi-faceted, affecting a wide range of disclosure documents, and 

imposing a range of potential impacts on investors who currently receive physical documents.430  

The Commission believes considering changes to existing guidance warrants further consideration.  

Accordingly, the Commission declines to make such change to the existing guidance in this 

rulemaking. 

One commenter sought assurance that moving to T+1 would not affect existing no-action 

letters and exemptive relief under Rule 10b-10 for dividend reinvestment programs (“DRIP”) that 

                                                 
428  See SIFMA August 3rd Letter, supra note 425, at 1 (stating that this acceleration of the 

settlement cycle heightens the need for the Commission to modernize its rules to make e-delivery 

the default mechanism for transmitting investor communications and disclosures); ICI Letter, 

supra note 16, at 11–12 (recommending that e-delivery should be the default method for delivering 

Rule 10b-10 confirmations); ASA Letter, supra note 16, at 3 (stating that, given the growing 

preferences of investors to receive such documentation electronically, it would be cost-effective 

and in the best interest of investors to allow e-delivery to be the default option for sending 

prospectuses and trade confirmations, adding that investors who wish to receive paper documents 

would still be afforded the ability to opt-in to receive paper). 

429  See T+1 Proposing Release, supra note 2, at 10463 n.222. 

430  Among other things, considering a transition to e-delivery by default would need to assess 

the implication of such a change with regard to the timing, format, and delivery mechanism, and 

those implications may differ among different types of documents, depending on the nature and 

purpose of the document. Another issue to consider would be how e-delivery by default would 

affect investor engagement with important information. 



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allow monthly account statements for trade activity.431  The Commission observes that a shorter 

settlement cycle would not change the relevant facts and circumstances described in the applicable 

staff no-action letters or exemptive relief regarding the application of Rule 10b-10 to DRIP 

transactions. 

C. Other Prospectus Delivery Matters 

As stated in the T+1 Proposing Release,432 broker-dealers have to comply with prospectus 

delivery obligations under the Securities Act.433  The regulations at 17 CFR 230.172 (“Securities 

Act Rule 172”) implement an “access equals delivery” model that permits, with certain exceptions, 

final prospectus delivery obligations to be satisfied by the filing of a final prospectus with the 

Commission, rather than delivery of the prospectus to purchasers.434  The Commission stated its 

preliminarily belief that a T+1 standard settlement cycle would not raise any significant legal or 

operational concerns for issuers or broker-dealers to comply with the prospectus delivery 

                                                 
431  SIFMA April Letter, supra note 16, at 15. 

432  T+1 Proposing Release, supra note 2, at 10464. 

433  15 U.S.C. 77a et seq.  Section 5(b)(2) of the Securities Act makes it unlawful to deliver 

(i.e., as part of settlement) a security “unless accompanied or preceded” by a prospectus that meets 

the requirements of section 10(a) of the Securities Act (known as a “final prospectus”).  15 U.S.C. 

77e(b)(2). 

434  15 U.S.C. 77e(b)(2).  Under Securities Act Rule 172(b), an obligation under section 5(b)(2) 

of the Securities Act to have a prospectus that satisfies the requirements of section 10(a) of the 

Securities Act precede or accompany the delivery of a security in a registered offering is satisfied 

only if the conditions specified in paragraph (c) of Rule 172 are met.  17 CFR 230.172(b).  

Pursuant to Rule 172(d), “access equals delivery” generally is not available to the offerings of 

most registered investment companies (e.g., mutual funds), business combination transactions, or 

offerings registered on Form S–8.  17 CFR 230.172(d).  The Commission recently amended Rule 

172 to allow registered closed-end funds and business development companies to rely on the rule.  

See Securities Offering Reform for Closed-End Investment Companies, Investment Company Act 

Release No. 33836 (Apr. 8, 2020), 85 FR 33353 (June 1, 2020). 



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obligations under the Securities Act.435  The Commission also requested comment on the 

following: (i) whether any specific legal or operational concerns would arise for issuers or broker-

dealers to comply with the prospectus delivery obligations under the Securities Act if the 

settlement cycle is shortened to T+1, and (ii) the extent to which the T+1 rule proposals may 

impact compliance with the prospectus delivery requirements under the Securities Act. 

One commenter stated that the requirements of 17 CFR 240.15c2-8(b) should not apply in a 

T+1 environment.436  Under Exchange Act Rule 15c2-8(b), with respect to an issue of securities 

where the issuer has not been previously required to file reports pursuant to section 13(a) or 15(d) 

of the Exchange Act,437 unless the issuer has been exempted from the requirement to file reports 

thereunder pursuant to section 12(h) of the Exchange Act,438 a broker-dealer is required to deliver 

a copy of the preliminary prospectus to any person who is expected to receive a confirmation of 

sale at least 48 hours prior to the sending of such confirmation (“48-hour preliminary prospectus 

delivery requirement”).439  The commenter stated that in a T+1 settlement cycle, many broker-

dealers will send confirmations on trade date to achieve settlement by T+1, and that Rule 15c2-8 

does not reflect present-day offering procedure timelines, public availability of preliminary 

prospectuses on EDGAR, or electronic delivery facilities.440  However, because the Commission is 

                                                 
435  T+1 Proposing Release, supra note 2, at 10464. 

436  SIFMA April Letter, supra note 16, at 13–14. 

437  15 U.S.C. 78m(a); 15 U.S.C. 78o(d). 

438  15 U.S.C. 78l(h). 

439  Exchange Act Rule 15c2-8(b). 

440  SIFMA April Letter, supra note 16, at 14. 



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adopting a T+2 standard settlement cycle for firm commitment offerings priced after 4:30 p.m. ET, 

and not a T+1 standard settlement cycle for these offerings, in final Rule 15c6-1(c),441 no 

inconsistency exists between the requirements set forth in the final amendments to Rule 15c6-1 

and existing Rule 15c2-8(b).  Accordingly, the Commission does not believe that Rule 15c2-8 

should be modified. 

D. Financial Responsibility Rules for Broker-Dealers 

As noted in the T+1 Proposing Release, certain provisions of the broker-dealer financial 

responsibility rules under the Exchange Act442 reference explicitly or implicitly the settlement date 

of a securities transaction.443  For example, paragraph (m) of 17 CFR 240.15c3-3 references the 

settlement date to prescribe the timeframe in which a broker-dealer must complete certain sell 

orders on behalf of customers.444  Specifically, Rule 15c3-3(m) provides that if a broker-dealer 

executes a sell order of a customer (other than an order to execute a sale of securities which the 

seller does not own) and if for any reason the broker-dealer has not obtained possession of the 

securities from the customer within ten business days after the settlement date, the broker-dealer 

must immediately close the transaction with the customer by purchasing securities of like kind and 

                                                 
441  See supra Part II.C.4. 

442  For purposes of this release, the term “financial responsibility rules” includes any rule 

adopted by the Commission pursuant to sections 8, 15(c)(3), 17(a) or 17(e)(1)(A) of the Exchange 

Act, any rule adopted by the Commission relating to hypothecation or lending of customer 

securities, or any rule adopted by the Commission relating to the protection of funds or securities.  

The Commission’s broker-dealer financial responsibility rules include 17 CFR 240.15c3-1, 

240.15c3-3, 240.17a-3, 240.17a-4, 240.17a-5, 240.17a-11, and 240.17a-13. 

443  See T+1 Proposing Release, supra note 2, at 10462–63. 

444  Exchange Act Rule 15c3-3(m). 



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quantity.445  In addition, settlement date is incorporated into paragraph (c)(9) of 17 CFR 240.15c3-

1,446 defining what it means to “promptly transmit” funds and “promptly deliver” securities within 

the meaning of paragraphs (a)(2)(i) and (v) of Rule 15c3-1.447  The concepts of promptly 

transmitting funds and promptly delivering securities are incorporated in other provisions of the 

financial responsibility rules as well, including paragraphs (k)(1)(iii) and (k)(2)(i) and (ii) of Rule 

15c3-3,448 paragraph (e)(1)(A) of 17 CFR 240.17a-5,449 and paragraph (a)(3) of 17 CFR 240.17a-

13.450 

The Commission requested comment regarding the potential impact that shortening the 

standard settlement cycle from T+2 to T+1 may have on the ability of broker-dealers to comply 

with the financial responsibility rules.  The Commission received one comment stating that 

shortening the standard settlement cycle to T+1 would reduce the number of days available to a 

broker-dealer to obtain possession or control of customer securities before being required to close 

out a customer transaction under Rule 15c3-3(m).451  The commenter indicated that it did not 

                                                 
445  However, paragraph (m) of Rule 15c3-3 provides that the term “customer” for the purpose 

of paragraph (m) does not include a broker or dealer who maintains an omnibus credit account 

with another broker or dealer in compliance with 12 CFR 220.7(f) (Rule 7(f) of Regulation T). 

446  Exchange Act Rule 15c3-1(c)(9). 

447  17 CFR 240.15c3-1(a)(2)(i) and (v). 

448  17 CFR 240.15c3-3(k)(1)(iii), (k)(2)(i)–(ii). 

449  Rule 17a-5(e)(1)(i)(A). 

450  Rule 17a-13(a)(3). 

451  See Fidelity Letter, supra note 16, at 7. 



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believe T+1 would materially burden broker-dealers or their customers and did not recommend 

changes to the rule.452 

The commenter also recommended that the Commission revisit Rule 15c3-3(d).453  Under 

Rule 15c3-3(d), not later than the next business day, a broker or dealer, as of the close of the 

preceding business day, must determine from its books or records the quantity of fully paid 

securities and excess margin securities in its possession or control and the quantity of fully paid 

securities and excess margin securities not in its possession or control.454  According to the 

commenter, existing interpretative guidance allows a firm to release securities a day prior to 

settlement, under certain conditions.  The commenter said that it is not clear what this guidance 

means in a T+1 environment.  The commenter offers an example: if segregation of customer assets 

is based on an end of day market value and end of day cash settled, it is not clear how the 

segregation of assets should be calculated and enforced in a T+1 environment.455  The commenter 

requested that the Commission work with broker-dealers to better understand the timeframes 

involved in the segregation process and how they can operate in a T+1 environment.  The 

Commission expects that the staff will continue to monitor the impact of a T+1 settlement cycle on 

this rule. 

                                                 
452  Id. at 7–8. 

453  Id. at 8. 

454  17 CFR 240.15c3-3(d)(1). 

455  See Fidelity Letter, supra note 16, at 8. 



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E. Changes to SRO Rules and Operations 

In the T+1 Proposing Release, the Commission stated that, as with the T+2 transition, it 

anticipated that the proposed transition to T+1 would require changes to SRO rules and operations 

to achieve consistency with a T+1 standard settlement cycle.456  Certain SRO rules reference 

existing Rule 15c6-1 or currently define “regular way” settlement as occurring on T+2 and, as 

such, may need to be amended in connection with shortening the standard settlement cycle to 

T+1.457  Certain timeframes or deadlines in SRO rules also may refer to the settlement date, either 

expressly or indirectly.  In such cases, the SROs may need to amend these rules in connection with 

shortening the settlement cycle to T+1.458  

In addition, the Commission also stated that SRO rules and operations may be affected to a 

greater extent than occurred during the T+2 transition, in part because the Commission has 

proposed more rule changes in the T+1 Proposing Release than in the T+2 Proposing Release.459  

For example, Financial Industry Regulatory Authority (“FINRA”) Rule 11860, which could be 

used to facilitate compliance with proposed Rule 15c6-2, currently requires that affirmations be 

completed no later than the day after trade date and therefore may need to be amended to align 

                                                 
456  See T+1 Proposing Release, supra note 2, at 10464. 

457  See, e.g., Exchange Act Release No. 79734 (Jan. 4, 2017), 82 FR 3030 (Jan. 10, 2017) (File 

No. SR-NSCC-2016-009). 

458  The T+1 Report similarly indicates that SROs will likely need to update their rules to 

facilitate a transition to a T+1 standard settlement cycle.  See T+1 Report, supra note 61, at 35–36. 

459  See T+1 Proposing Release, supra note 2, at 10464 (discussing the same); see also T+2 

Adopting Release, supra note 4, at 15568–75 (discussing the effect of the T+2 transition on SRO 

rules and operations). 



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with the requirements in final Rule 15c6-2.  The Commission solicited comment on the extent to 

which the T+1 rule proposals may impact existing SRO rules and operations.460 

While urging the Commission to implement T+1, one commenter requested that the 

Commission deny or delay implementation of a National Securities Clearing Corporation 

(“NSCC”) rule to enhance capital requirements, stating that the NSCC rule would undermine the 

benefits of T+1 and that the calculation method is flawed.461  The Commission has completed its 

review of the NSCC proposed rule change and consideration of the comments on the proposal,462 

and the Commission issued an approval order finding that the NSCC proposed rule change was 

consistent with the requirements of the Exchange Act and the rules and regulations thereunder 

applicable to NSCC.463  Furthermore, the rule change concerned membership standards at NSCC 

related to minimum capital requirements, designed to ensure that capital requirements applied to 

                                                 
460  T+1 Proposing Release, supra note 2, at 10464. 

461  Wilson-Davis Letter, supra note 16, at 1. 

462  Comments responding to the NSCC rule proposal are available at 

https://www.sec.gov/comments/sr-nscc-2021-016/srnscc2021016.htm. 

463  See Exchange Act Release No. 95618 (Aug. 26, 2022); 87 FR 53796 (Sept. 1, 2022) (SR-

NSCC-2021-016) (approving proposed rule change to enhance capital requirements and make 

other changes); see also Exchange Act Release No. 93856 (Dec. 22, 2021), 86 FR 74185 (Dec. 29, 

2021) (SR-NSCC-2021-016) (publishing notice of filing and soliciting public comment); 

Exchange Act Release No. 94068 (Jan. 26, 2022), 87 FR 5544 (Feb. 1, 2022) (SR-NSCC-2021-

016) (designating a longer period within which to approve, disapprove, or institute proceedings to 

determine whether to approve or disapprove); Exchange Act Release No. 94494 (Mar. 23, 2022), 

87 FR 18444 (Mar. 30, 2022) (SR-NSCC-2021-016) (instituting proceedings to determine whether 

to approve or disapprove); Exchange Act Release No. 94168 (June 23, 2022), 87 FR 38792 (June 

29, 2022) (SR–NSCC-2021-016) (designating a longer period for Commission action on the 

proceedings to determine whether to approve or disapprove).   

https://www.sec.gov/comments/sr-nscc-2021-016/srnscc2021016.htm


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NSCC members appropriately incorporate the risks of their clearing activity, has already been 

implemented, and has no bearing on the length of the settlement cycle.   

In the context of corporate action events, one commenter advocated for more standardized 

practices, urging the Commission to consider more automation and transparency in issuer 

declarations of events to improve timeliness as well as support various SROs in adjusting certain 

rules related to the processing of events (e.g., FINRA Rules 11140 and 11810).464  The commenter 

did not make any specific suggestion for policy action regarding corporate action events that 

should be taken in connection with the current rulemaking or the transition to a shorter settlement 

cycle, and the Commission is not taking additional action at this time. 

In the T+1 Proposing Release, the Commission asked whether the DTC’s “cover/protect” 

process for certain voluntary reorganizations including tenders, exchanges, or rights offerings 

would be affected operationally or need to be changed in under a T+1 settlement cycle.465  One 

commenter claimed that the cover/protect period is inconsistently applied currently for many offers 

and recommended that, to the extent cover/protect periods will remain in effect, they should be 

aligned to the new T+1 settlement cycle.466  The commenter, however, did not identify any specific 

instances where the T+1 settlement cycle would give rise to issues with the “cover/protect” 

process.  In 2022, DTCC issued two reports identifying the functional changes at NSCC, DTC, and 

                                                 
464  SIFMA April Letter, supra note 16, at 14–15. 

465  See T+1 Proposing Release, supra note 2, at 10452.  This procedure enables DTC 

participants to allow their investors to make or change their final elections until the end of an 

offer’s expiration date; where an offer allows, participants provide DTC with a notice of 

guaranteed delivery, allowing later delivery of the shares or rights.  See id.; see also T+1 Report, 

supra note 61, at 20. 

466  See SIFMA April Letter, supra note 16, at 14. 



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DTCC ITP that will be implemented for T+1, including the planned approach to the cover/protect 

process.467  Such planning documents can help market participants understand and prepare for 

potential changes to processes like the cover/protect process.  If during implementation specific 

issues arise, the Commission encourages industry participants to bring them to the attention of 

Commission staff.  Accordingly, the Commission is not at this time providing additional guidance. 

One commenter stated that it appreciates the support of the Commission in the 

dematerialization of physical certificates, and the commenter requested continuing support for the 

electronic movement of securities, stating its support for the use of electronic medallion signature 

guarantees and a central hub to move documents between financial institutions that is secure and 

contains an audit trail of the receipt of documentation.  As stated in the T+1 Proposing Release, the 

Commission has long advocated a reduction in the use of certificates in the trading environment by 

immobilizing or dematerializing securities and has acknowledged that the use of certificates 

increases the costs and risks of clearing and settling securities for all parties processing the 

securities, including those involved in the U.S. system for clearance and settlement.468   

                                                 
467  See DTCC, Accelerated Settlement (T+1) – DTC, NSCC and ITP Functional Changes 14–

15 (Aug. 2022), https://www.dtcc.com/-/media/Files/PDFs/T2/T1-Functional-Changes.pdf; DTCC, 

T+1 Test Approach 15–16 (Aug. 2022), https://www.dtcc.com/-/media/Files/PDFs/T2/T1-Test-

Approach.pdf (each discussing changes to the cover/protect process). 

468  T+1 Proposing Release, supra note 2, at 10474. 

https://www.dtcc.com/-/media/Files/PDFs/T2/T1-Functional-Changes.pdf
https://www.dtcc.com/-/media/Files/PDFs/T2/T1-Test-Approach.pdf
https://www.dtcc.com/-/media/Files/PDFs/T2/T1-Test-Approach.pdf


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VII. Compliance Dates 

A. Exchange Act Rule 15c6-1 

In the T+1 Proposing Release, the Commission proposed March 31, 2024 as the 

compliance date for each of the proposed rules.469  The Commission received numerous comments 

regarding the compliance dates for Rules 15c6-1, 15c6-2, and 204-2, generally focused on the 

impact the proposed compliance date would have on the timing of an industry-wide effort to 

transition to a T+1 standard settlement cycle.  The commenters offered a range of potential 

alternatives.  For example, many individual investors recommended that the Commission 

accelerate the compliance date so that they and other retail investors could obtain the benefits of a 

shorter settlement cycle sooner than 2024.470  One commenter supported the proposed compliance 

date of March 31, 2024, stating that such a date was generally aligned with the industry-led effort 

regarding the T+1 transition.471  Given the extent of planning, operational changes, and testing 

                                                 
469  Id. at 10436.  

470  See, e.g., letter from Chris Barnard (Feb. 22, 2022); Mark C. Letter, supra note 19; letter 

from Jacy Carroll (Feb. 19, 2022); letter from Scott Clarke (Feb. 17, 2022); letter from Isaac 

Crawford (Feb. 20, 2022); letter from Nathan D. (Mar. 8, 2022); letter from Austin Englebert (Feb. 

22, 2022); letter from Justina Fullwood (Feb. 17, 2022); letter from Brayan Hernandez (Feb. 17, 

2022); Kelley Letter, supra note 16; Kyle 1 Letter, supra note 16; letter from Jason Layne (Feb. 

19, 2022); letter from Jordan Liske (Mar. 3, 2022); letter from Trevor Longmire (Feb. 17, 2022); 

letter from Joshua Lory (Feb. 20, 2022); Mahdere Letter, supra note 18; letter from Cain Maynard 

(Feb. 17, 2022); letter from Brian Padrick (Feb. 18, 2022); letter from Jimmy Pham (Feb. 18, 

2022); letter from Anthony R. (Feb. 18, 2022); Rathbone Letter, supra note 18; letter from Brian 

Renner (Feb. 9, 2022); letter from Daniel Richardson (Feb. 17, 2022); letter from Andrew Robison 

(Apr. 8, 2022); letter from Michael Ruiz (Feb. 17, 2022); Ryan 1 Letter, supra note 16; letter from 

Adrian Santos (Feb. 17, 2022); letter from Christopher Sneed (Feb. 18, 2022); Stauts Letter, supra 

note 16; Stewart Letter, supra note 16; letter from Casey C. Vallett (Feb. 17, 2022); Zach Letter, 

supra note 16.     

471  See Better Markets Letter, supra note 16, at 5–6.  



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necessary to achieve a successful and orderly transition to a T+1 standard settlement cycle, as 

discussed further below, the Commission is moving the compliance date to Tuesday, May 28, 

2024, which follows a Federal holiday for which both markets and banks will be closed, providing 

market participants with a three-day weekend to facilitate the transition to a T+1 standard 

settlement cycle. 

Multiple comments, including those submitted by members of the Industry Working Group 

(“IWG”) leading at the industry level the effort to facilitate an orderly transition to T+1,472  

recommended specifically that the Commission postpone the compliance date from March 31, 

2024, to September 3, 2024.473  Some commenters recommended that the Commission postpone 

the compliance date further, to no sooner than two years from the adoption of the proposed 

rules.474  In general, a commenter representing the IWG indicated that approximately 16 to 24 

months from adoption of a final rule would be necessary to implement a T+1 settlement cycle.475  

                                                 
472  As discussed in the T+1 Proposing Release, supra note 2, at 10445, the IWG is comprised 

of representatives from SIFMA, ICI, and DTCC, and is being coordinated in part by Deloitte.  The 

IWG published the T+1 Report, supra note 61, in September 2021 and the T+1 Playbook, supra 

note 134, in August 2022. 

473  See, e.g., CCMA April Letter, supra note 16, at 2; Fidelity Letter, supra note 16, at 12; 

IAA October Letter, supra note 222, at 1–2; ICI Letter, supra note 16, at 2, 8; MFA Letter, supra 

note 16, at 2; SIFMA April Letter, supra note 16, at 2; SIFMA August 26th Letter, supra note 207, 

at 1; letter from Tom Price, Managing Director, SIFMA, et al (Oct. 10, 2022), at 1 (“The 

Associations and DTCC Letter”); letter from Ken Bentsen, Jr., President and CEO, SIFMA (Dec. 

20, 2022), at 1 (“SIFMA December Letter”); letter from Ken Bentsen, Jr., President and CEO, 

SIFMA (Feb. 8, 2023), at 1 (“SIFMA February Letter”). 

474  See, e.g., SIFMA April Letter, supra note 16, at 2; State Street Letter, supra note 16, at 5 

(citing the planning, operational changes, and testing necessary for a successful transition). 

475  See SIFMA December Letter, supra note 473, at 3. 



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The above commenters provided several reasons for postponing from March to September.  

First, they prefer to align the transition with the Labor Day holiday weekend so that market 

participants can implement technology and other changes with the benefit of an extra day when 

markets would be closed.  Some commenters believe that the absence of a three-day weekend 

would create financial risk for market participants because they would lack sufficient time to 

validate production changes and validate a “fall back” plan to a T+2 standard if necessary in 

response to any issues that arise.476  Second, they prefer to enable the U.S. and Canadian markets 

to complete the transition over a commonly shared holiday weekend, and explain that Labor Day 

weekend is the only such weekend in 2024.477  In the commenters’ view, the absence of a unified 

transition in the U.S. and Canada would result in duplicative testing, as well as introduce issues 

with respect to dual-listed products, depository receipt conversions, ETF creations and 

redemptions, ADR conversions, buy-ins, and other activities associated with cross-border 

transactions.478  Third, they prefer to take more time to complete the transition process, including 

to budget, design and implement technology and operational changes, to conduct both individual-

level and industry-wide testing in advance of the transition, and to educate their customers and 

                                                 
476  See id. at 3; see also DTCC Letter, supra note 16, at 3 (supporting a three-day weekend to 

manage operational risks associated with the transition process); IAA April Letter, supra note 16, 

at 8 (supporting a three-day weekend to complete and test changes to systems outside of an active 

trading day); STA Letter, supra note 16, at 2. 

477  See SIFMA December Letter, supra note 473, at 2; SIFMA February Letter, supra note 

473, at 1; letter from Christopher Climo, Chief Operating Officer, Investment Industry Association 

of Canada (Feb. 9, 2023), at 2 (also stating a preference for a long weekend because of the extra 

day to validate that the transition went as planned, and for avoiding transitions at quarter-ends, 

such as March 31, because they are significant trading days, as well as corporate action dates). 

478  See SIFMA December Letter, supra note 473, at 4. 



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market participants generally regarding the operational and other changes necessary to ensure an 

orderly transition to a T+1 standard settlement cycle.479  Fourth, they believe that third-party 

vendors that support the U.S. securities market, including transfer agents and custodians, will not 

begin to plan for and implement operational changes until the Commission adopts a final rule.480  

The current version of the T+1 Playbook, published by the IWG, and which market participants are 

using to identify, design, and plan for the individual-level and industry-level implementation of a 

T+1 standard settlement cycle, contemplates activities, including industry-wide testing, that would 

continue into third quarter (Q3) 2024.481  DTCC has also published an industry-wide testing plan 

                                                 
479  See, e.g., CCMA April Letter, supra note 16, at 2; Fidelity Letter, supra note 16, at 12; 

IAA October Letter, supra note 222, at 1–2; ICI Letter, supra note 16, at 2, 8; MFA Letter, supra 

note 16, at 2; SIFMA April Letter, supra note 16, at 2; SIFMA August 26th Letter, supra note 207, 

at 1; see also OCC Letter, supra note 16, at 3 (stating that firms may already be engaged in other 

large technology projects that could impact T+1 readiness); SIFMA December Letter, supra note 

473, at 2 (stating that firms have planned to complete technology projects related to the LIBOR 

transition in Q2 2023); SIFMA February Letter, supra note 473, at 1 (explaining that the March 

date “will pose substantial and unnecessary risk to the marketplace and potentially create an 

immense amount of fails in the system” and that “[w]ithout proper testing, socialization, and 

notification, U.S. and international markets would be negatively impacted”); letter from Keith 

Evans, Executive Director, Canadian Capital Markets Association (Feb. 9, 2023), at 1 (explaining 

that a compliance date in the first quarter would introduce significant risks such as a material 

increase in failed trades, increased buy-ins, and higher collateral costs for Canadian and American 

market participants) (“CCMA February Letter”); letter from Deborah Mercer-Miller, Chair, 

Association of Global Custodians (Feb. 11, 2023) (also stating that a March 31, 2024 compliance 

date “could pose significant and unnecessary risk to the market and potentially create a high 

number of failed trades,” and expressing concern “about the ability of smaller market participants, 

vendors, and other service providers to enable T+1 settlement on a 13-month implementation 

timetable”). 

480  See SIFMA December Letter, supra note 473, at 4. 

481  See T+1 Playbook, supra note 134, at 10–14.  The T+1 Playbook was most recently 

updated in December 2022. 



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that contemplates testing until September 2024,482 though DTCC has also publicly acknowledged 

that the ultimate T+1 transition date would depend on the compliance date set by the Commission 

in this release.483 

The Commission acknowledges that a three-day weekend that includes a bank holiday will 

assist market participants in completing the transition to a T+1 standard settlement cycle in an 

orderly manner.  Although March 31, 2024 falls at the end of a three-day weekend commenters 

noted that this weekend is not a Federal holiday and does not provide a bank holiday, and so the 

banking industry and U.S. securities markets would not be synchronized in terms of implementing 

final testing and systems changes.484  As discussed throughout this section, the Commission is 

adopting a compliance date of May 28, 2024, which follows a Federal holiday for which both 

markets and banks will be closed. 

The Commission also acknowledges that aligning the U.S. and Canadian transitions would 

be beneficial to market participants in both markets, reducing complexity with respect to cross-

border transactions between the two jurisdictions.  The Canadian Securities Authorities proposed 

                                                 
482  See DTCC, DTCC T+1 Test Approach: Detailed Testing Framework (Jan. 2023), 

https://www.dtcc.com/ust1/-/media/Files/PDFs/T2/UST1-Detailed-Test-Document (explaining that 

the T+1 transition date has yet to be determined, and so for planning purposes the document 

references a Sept. 3, 2024 transition date). 

483  See Richard Schwartz, ‘We’re halfway through a marathon’ says DTCC as it releases 

document to help preparations for T+1, The Trade, Jan. 24, 2023, 

https://www.thetradenews.com/were-halfway-through-a-marathon-says-dtcc-as-it-releases-

document-to-help-preparations-for-t1/ (quoting Robert Cavallo, director, clearance and settlement, 

product management at DTCC as follows: “We are halfway through a marathon and still have a 

long way to go, but now that 2024 is in sight – whether that ultimate date is determined to be 

March or September – we must move from planning and development to testing.”). 

484  See, e.g., SIFMA December Letter, supra note 473, at 3. 

https://www.dtcc.com/ust1/-/media/Files/PDFs/T2/UST1-Detailed-Test-Document
https://www.thetradenews.com/were-halfway-through-a-marathon-says-dtcc-as-it-releases-document-to-help-preparations-for-t1/
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in December to implement a T+1 settlement cycle in Canada, explaining that “the close ties 

between the Canadian and American markets, in particular the large number of inter-listed 

securities” make it “critical” for Canadian markets to move in concert with the U.S.485  The 

Commission intends to work closely with the relevant Canadian authorities to ensure an orderly 

transition to T+1 for the securities markets in the U.S. and Canada that minimizes the potential for 

risk, such as the risks associated with settlement fails.   

Some commenters explained that market participants tend to implement technology freezes 

in the November to February timeframe to minimize the impact of staff on leave during the 

holidays and to facilitate various year-end accounting activities, including tax preparation.486  In 

the view of these commenters, a March 2024 compliance date would require that a substantial 

portion of technology changes and testing not occur in the November to February window, 

meaning they may need to occur primarily in March 2024, close in time to the compliance date.  

The Commission believes that a May 28, 2024, transition date will provide sufficient time beyond 

the typical November to February technology freeze to ensure an orderly transition.  In total, 

market participants will have more than fifteen months following the adoption of the final rules to 

take the appropriate steps to implement any technology or other changes to support a T+1 standard 

settlement cycle, providing a substantial amount of time to plan for and structure any technology 

freezes and to address personnel shortages while developing, building, testing and implementing 

                                                 
485  CSA, Notice and Request for Comment – Proposed Amendments to National Instrument 

24-101 Institutional Trade Matching and Settlement and Proposed Changes to Companion Policy 

24-101 Institutional Trade Matching and Settlement, Dec. 15, 2022, 

https://www.osc.ca/sites/default/files/2022-12/ni_20221215_24-101_rfc_trade-matching-

settlement.pdf.  

486  See, e.g., ICI Letter, supra note 16, at 9; see also AGC April Letter, supra note 16, at 4; 

SIFMA April Letter, supra note 16, at 3–4.  

https://www.osc.ca/sites/default/files/2022-12/ni_20221215_24-101_rfc_trade-matching-settlement.pdf
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technology changes to support a T+1 standard settlement cycle.  Market participants should take 

appropriate steps, mindful of the May 28, 2024 compliance date, to ensure that technology 

implementation can occur consistent with the compliance date.  While a May 28, 2024 compliance 

date may require market participants to reallocate some resources and reprioritize some technology 

projects as compared to a September 3, 2024 compliance date, the Commission believes that a 

May 28, 2024 compliance date would also allow the substantial benefits of shortening the 

settlement cycle to be achieved sooner.487 

With respect to the preference for a September 2024 compliance date more generally to 

ensure appropriate time for sufficient planning, testing, and coordination with third-party 

vendors,488 the Commission appreciates that providing a longer implementation period until the 

compliance date for any rule necessarily provides more time to prepare, test, and educate than a 

shorter implementation period would.  As discussed in the T+1 Proposing Release, however, the 

Commission’s objective is to ensure an orderly transition to a T+1 standard settlement cycle that 

realizes the substantial benefits of shortening the settlement cycle as soon as possible.  In light of 

its objective of ensuring an orderly transition, the Commission is not accelerating the proposed 

compliance date, even though many commenters recommended that the Commission pursue a 

more expeditious timetable for the transition than even March 2024.489  Given that some market 

participants expressed interest for a faster transition to a T+1 settlement cycle,490 the Commission 

                                                 
487  See infra Part VIII.C.1 (discussing the anticipated benefits of shortening the settlement 

cycle). 

488  See supra notes 479–480 and accompanying text. 

489  See supra note 470 and accompanying text. 

490  See id. 



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believes that May 28, 2024, provides an effective balance of ensuring that the compliance date 

provides sufficient time for planning and executing an orderly transition while also promoting an 

expeditious process that will allow market participants to realize the substantial benefits of 

shortening the settlement cycle sooner than later.  In addition, the Commission believes that the 

May 28, 2024, compliance date will help ensure that market participants have sufficient time to 

implement the changes necessary to reduce risk, such as risks associated with the potential for 

increases in settlement fails.  The Commission also believes that the additional time will help 

ensure that market participants complete appropriate levels of testing, provide timely notice to 

potentially affected parties and vendors, and, more generally, engage in the education and outreach 

necessary to ensure an orderly transition.491 

Some commenters indicated that the Commission should set the compliance date no sooner 

than two years from the adoption of final rules.  As discussed above, while an additional seven 

months of preparation (i.e., two years from adoption of the final rules) likely would facilitate a 

higher level of preparation, testing, and education, the Commission believes that providing more 

than fifteen months until the compliance date for a T+1 standard settlement cycle is sufficient to 

ensure an orderly transition.  Also as discussed above, while fifteen months of preparation rather 

than two years may require some broker-dealers to reallocate some resources or reprioritize some 

technology projects to meet the May 28, 2024, transition, the Commission believes that the 

substantial benefits of shortening the settlement cycle would also be achieved sooner with a May 

28, 2024, transition.492   

                                                 
491  See supra note 479 and accompanying text. 

492  See infra Part VIII.D.5 (discussing the potential economic effects of a May 28, 2024, 

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Accordingly, the compliance date for the amendments to Rule 15c6-1—other than the 

amendment discussed in Part VII.B below—will be May 28, 2024.   

B. Exchange Act Rule 15c6-1(b): Exclusion for Security-Based Swaps 

In response to comments received, and as discussed in Parts II.B.2 and II.C.3, the 

Commission has modified Rule 15c6-1(b) to exclude security-based swaps from the requirements 

under Rule 15c6-1(a).  For the reasons discussed in Part II.C.3, and because Rule 15c6-1(b) 

concerns the scope of transactions excluded from the requirements of the Rule 15c6-1(a), the 

amendment will become effective upon the effective date. 

C. Exchange Act Rule 15c6-2 and Advisers Act Rule 204-2 

With respect to proposed Exchange Act Rule 15c6-2 and the proposed amendments to 

Advisers Act Rule 204-2, some commenters requested that the Commission set a compliance date 

later than the compliance date for Rule 15c6-1 to allow market participants time to focus their 

efforts on the T+1 transition, including the related technology and operational changes that they 

would need to design, build, test, and implement, without also having to take steps to ensure 

compliance with respect to same-day allocations, confirmations, and affirmations.493  The 

Commission disagrees.  Any technology changes, operational changes, or other efforts necessary 

to advance the same-day affirmation objective should occur in tandem with efforts focused on the 

T+1 transition, and so the Commission is adopting a May 28, 2024, compliance date for these 

rules, for the same reasons discussed in Part VII.A.  In the Commission’s view, market participants 

are more likely to take steps that materially advance the same-day affirmation objective if they 

                                                 
493  See, e.g., Fidelity Letter, supra note 16, at 12 (stating that “the proposed Compliance Date 

should apply only to the proposed move to T+1”); ICI Letter, supra note 16, at 5–7 (indicating that 

efforts to ensure compliance with Rule 15c6-2 would likely divert the time and resources that 

industry participants need to focus on the transition to T+1 settlement).   



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consider such steps alongside a more holistic review and, where necessary, modification of 

systems and operations to support the standard settlement cycle because, for institutional 

transactions, allocations, confirmations, and affirmations are integral to the settlement process.  

The Commission believes that, because the systems and operational changes necessary to facilitate 

a transition to T+1 standard settlement cycle generally would overlap with the systems that 

facilitate same-day affirmation, market participants would benefit from considering at the same 

time changes that can accommodate both sets of requirements. 

Accordingly, the compliance date for Rule 15c6-2 and the amendments to Rule 204 will be 

May 28, 2024.  

D. Exchange Act Rule 17Ad-27 

The Commission received one comment regarding the compliance date for Rule 17Ad-27, 

in which the commenter requested that, with respect to Rule 17Ad-27(b) requiring an annual report 

on straight-through processing, the Commission require submission of the first annual report only 

after the T+1 transition has been completed because it will help ensure a consistent baseline over 

time in the data provided by the CMSP as part of its annual report.494  Because the Commission is 

adopting a compliance date of May 28, 2024, for Rule 15c6-2 and the amendments to Rules 15c6-

1 and 204-2, and the Commission proposed the same compliance date for Rule 17Ad-27 as the 

other rules and rule amendments, a CMSP would not be required to submit its first annual report 

until after the T+1 transition has been completed.  Accordingly, the Commission believes that a 

May 28, 2024, compliance date is also appropriate for Rule 17Ad-27 and consistent with the 

comment received.  Consistent with the requirement in Rule 17Ad-27(d) that the report must be 

                                                 
494  See DTCC ITP September Letter, supra note 325, at 3.  



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filed within 60 days of the end of the twelve-month period covered by the report, the first report 

must be filed no later than March 1, 2025. 

VIII. Economic Analysis 

The Commission has prepared an economic analysis in connection with the amendments to 

Rules 15c6-1 and 204-2 and new Rules 15c6-2 and 17Ad-27.  The economic analysis begins with a 

discussion of the risks inherent in the standard settlement cycle for securities transactions and the 

impact that shortening the standard settlement cycle may have on the management and mitigation 

of these risks.  Next, the economic analysis summarizes and addresses comments relating to the 

costs and benefits of a shorter settlement cycle, as well as comments about the economic analysis 

provided in the T+1 Proposing Release.  Finally, the economic analysis discusses certain market 

frictions that potentially impair the ability of market participants to shorten the settlement cycle in 

the absence of a Commission rule.   

The discussion regarding settlement cycle risks and market frictions frames the 

Commission’s analysis of the rule’s benefits and costs in later sections.  The Commission believes 

that the amendment to Rule 15c6-1(a) will ameliorate these market frictions and thus will reduce 

the risks inherent in settlement.  The Commission further believes that the combination of 

amendments and new rules that it is adopting will advance two longstanding objectives shared by 

the Commission and the securities industry: the completion of trade allocations, confirmations, and 

affirmations on trade date (an objective often referred to as “same-day affirmation”) and the 

straight-through processing of securities transactions.495 

After discussing the aforementioned risks and market frictions, the economic analysis 

provides a baseline of current practices.  The economic analysis then discusses the likely economic 

                                                 
495  See T+1 Proposing Release, supra note 2, at 10452–53. 



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effects of the amendments and new rules, such as the costs and benefits of the adopted 

amendments and new rules, as well as its effects on efficiency, competition, and capital 

formation.496  The Commission has, where possible, attempted to quantify the economic effects 

expected to result from the amendments and new rules.  However, the Commission is unable to 

quantify some economic effects because it lacks the information necessary to provide a reasonable 

estimate.  In those instances, the discussion of the economic effects of the amendments and new 

rules is qualitative in nature. 

A. Background 

As previously discussed, the amendment to Rule 15c6-1(a) prohibits, unless otherwise 

expressly agreed to by both parties at the time of the transaction, a broker-dealer from effecting or 

entering into a contract for the purchase or sale of certain securities that provides for payment of 

funds and delivery of securities later than the first business day after the date of the contract 

subject to certain exceptions provided in the rule.  Several commenters addressed the impact that 

the length of the settlement cycle would have on risk to central counterparties (“CCPs”) and 

                                                 
496  Exchange Act section 3(f) requires the Commission, when it is engaged in rulemaking 

pursuant to the Exchange Act and is required to consider or determine whether an action is 

necessary or appropriate in the public interest, to consider, in addition to the protection of 

investors, whether the action will promote efficiency, competition, and capital formation.  See 15 

U.S.C. 78c(f).  In addition, Exchange Act section 23(a)(2) requires the Commission, when making 

rules pursuant to the Exchange Act, to consider among other matters, the impact that any such rule 

would have on competition and not to adopt any rule that would impose a burden on competition 

that is not necessary or appropriate in furtherance of the purposes of the Exchange Act.  See 15 

U.S.C. 78w(a)(2). 



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market participants (including credit, market and liquidity risk),497 margin requirements,498 capital 

liquidity,499 post-trade processing and operational efficiency,500 financial stability,501 and systemic 

risk in the financial system.502  In its analysis of the economic effects of the new rules and 

amendments to existing rules, the Commission has considered the risks that market participants, 

including broker-dealers, clearing agencies, investment advisers, and institutional and retail 

investors are exposed to during the settlement cycle and how those risks change with the length of 

the cycle. 

The settlement cycle spans the time between when a trade is executed and when cash and 

securities are delivered to the seller and buyer, respectively.  During this time, each party to a 

trade faces the risk that its counterparty may fail to meet its obligations to deliver cash or 

securities.  When a counterparty fails to meet its obligations to deliver cash or securities, the non-

                                                 
497  See, e.g., DTCC Letter, supra note 16, at 2–3; Fidelity Letter, supra note 16, at 2; IAA 

April Letter, supra note 16, at 1; ICI Letter, supra note 16, at 1, 3; MFA Letter, supra note 16, at 

1; OCC Letter, supra note 16, at 2; RMA Letter, supra note 16, at 3; SIFMA April Letter, supra 

note 16, at 2; State Street Letter, supra note 16, at 4. 

498  See, e.g., Cornell Law Letter, supra note 16, at 3; DTCC Letter, supra note 16, at 2–3; 

Fidelity Letter, supra note 16, at 2; MMI Letter, supra note 16, at 2; State Street Letter, supra note 

16, at 4. 

499  See, e.g., DTCC Letter, supra note 16, at 2–3; MMI Letter, supra note 16, at 2; State Street 

Letter, supra note 16, at 4. 

500  See, e.g., Cornell Law Letter, supra note 16, at 3; DTCC Letter, supra note 16, at 2–3; IAA 

April Letter, supra note 16, at 1; RMA Letter, supra note 16, at 3; State Street Letter, supra note 

16, at 4. 

501  See, e.g., ICI Letter, supra note 16, at 1; MMI Letter, supra note 16, at 2. 

502  See, e.g., Fidelity Letter, supra note 16, at 2; MFA Letter, supra note 16, at 1; MMI Letter, 

supra note 16, at 2; RMA Letter, supra note 16, at 3. 



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defaulting party may bear costs as a result.  For example, if the non-defaulting party chooses to 

enter into a new transaction, it will be with a new counterparty and will occur at a potentially 

different price.503  The length of the settlement cycle influences this risk in two ways: (i) through 

its effect on counterparty exposures to price volatility, and (ii) through its effect on the value of 

outstanding obligations. 

First, additional time allows asset prices to move further away from the price of the 

original trade.  For example, in a simplified model, where daily asset returns are statistically 

independent, the variance of an asset’s return over t days is equal to t multiplied by the daily 

variance of the asset’s return.  Thus, when the daily variance of returns is constant, the variance 

of returns increases linearly in the number of days.504  In other words, the more days that elapse 

between when a trade is executed and when a counterparty defaults, the larger the variance of 

price change will be, and the more likely that the asset’s price will deviate from the execution 

price.  The price change could be positive or negative, but in the event of a price increase, the 

buyer must pay more than the original execution price, and in the event of a price decrease, the 

                                                 
503  This applies to the general case of a transaction that is not novated to a CCP.  As described 

above, in its role as a CCP, NSCC becomes counterparty to both initial parties to a centrally 

cleared transaction.  In the case of such transactions, while each initial party is not exposed to the 

risk that its original counterparty defaults, both are exposed to the risk of CCP default.  Similarly, 

the CCP is exposed to the risk that either initial party defaults.   

504  More generally, because total variance over multiple days is equal to the sum of daily 

variances and variables related to the correlation between daily returns, total variance increases 

with time so long as daily returns are not highly negatively correlated.  See, e.g., MORRIS H. 

DEGROOT AND MARK J. SCHERVISH, PROBABILITY AND STATISTICS 216 (Addison-Wesley 

Publishing Co., 4th ed. 1986). 



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buyer may buy the security for less than the original execution price.505 

Second, the length of the settlement cycle directly influences the quantity of transactions 

awaiting settlement.  For example, assuming no change in transaction volumes, the volume of 

unsettled trades under a T+1 settlement cycle is approximately half the volume of unsettled 

trades under a T+2 settlement cycle.506  Thus, in the event of a default, counterparties would have 

to enter into a new transaction, or otherwise close out approximately half as many trades under a 

T+1 standard settlement cycle than under a T+2 standard.  This means that for a given adverse 

move in prices, the financial losses resulting from a counterparty default will be approximately 

half as large under a T+1 standard settlement cycle. 

Market participants manage and mitigate settlement risk in a number of specific ways.507  

Generally, these methods entail costs to market participants.  In some cases, these costs may be 

explicit.  For instance, clearing brokers typically explicitly charge introducing brokers to clear 

trades.  Other costs are implicit, such as the opportunity cost of assets posted as collateral or 

limits placed on the trading activities of a broker’s customers. 

The Commission believes that, given current trading volumes and complexity, certain 

market frictions may prevent securities markets from shortening the settlement cycle in the 

absence of regulatory intervention.  The Commission has considered two key market frictions 

related to investments required to implement a shorter settlement cycle.  The first is a coordination 

                                                 
505  Similarly, a seller whose counterparty fails faces similar risks with respect to the security 

price but in the opposite direction. 

506  The relationship is approximate because some trades may settle early or, if both 

counterparties agree at the time of the transaction, settle after the time limit in Rule 15c6-1(a). 

507  See T+2 Proposing Release, supra note 4, at 69251 (discussing the entities that compose 

the clearance and settlement infrastructure for U.S. securities markets). 



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problem that arises when some of the benefits of actions taken by one or more market participants 

are only realized when other market participants take a similar action.  For example, under the 

current regulatory structure, if a particular institutional investor were to make a technological 

investment to reduce the time it requires to match and allocate trades without a corresponding 

action by its clearing broker-dealers, the institutional investor cannot fully realize the benefits of its 

investment, as the settlement process is limited by the capabilities of the clearing agency for trade 

matching and allocation.  More generally, when every market participant must incur costs of an 

upgrade for the entire market to enjoy a benefit, the result is a coordination problem where each 

market participant may be reluctant to make the necessary investments until it can be reasonably 

certain that others will also do so.  In general, these coordination problems may be resolved if all 

parties can credibly commit to the necessary infrastructure investments.  Regulatory intervention is 

one possible way of coordinating market participants to undertake the investments necessary to 

support a shorter settlement cycle.  Such intervention could come through Commission rulemaking 

or through a coordinated set of SRO rule changes. 

In addition to coordination problems, a second market friction related to the settlement 

cycle involves situations where one market participant’s investments result in benefits for other 

market participants.  For example, if a market participant invests in a technology that reduces the 

error rate in its trade matching, not only does it benefit from fewer errors, but its counterparties and 

other market participants may also benefit from more robust trade matching.  However, because 

market participants do not necessarily take into account the benefits that may accrue to other 

market participants (also known as “externalities”) when market participants choose the level of 

investment in their systems, the level of investment in technologies that reduce errors might be less 

than efficient for the entire market.  More generally, underinvestment may result because each 



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participant only takes into account its own costs and benefits when choosing which infrastructure 

improvements or investments to make, and does not take into account the costs and benefits that 

may accrue to its counterparties, other market participants, or financial markets generally. 

Moreover, because market participants that incur similar costs to move to a shorter 

settlement cycle may nevertheless experience different levels of economic benefits, there is likely 

heterogeneity across market participants in the demand for a shorter settlement cycle.  This 

heterogeneity may exacerbate coordination problems and underinvestment.  Market participants 

that do not expect to receive direct benefits from settling transactions earlier may lack incentives to 

invest in infrastructure to support a shorter settlement cycle and thus could make it difficult for the 

market as a whole to realize the overall risk reduction that the Commission believes a shorter 

settlement cycle may bring. 

For example, the level and nature of settlement risk exposures vary across different types of 

market participants.  A market participant’s characteristics and trading strategies can influence the 

level of settlement risk it faces.  For example, large market participants will generally be exposed 

to more settlement risk than small market participants because they trade in larger volume.  

However, large market participants also trade across a larger variety of assets and may face less 

idiosyncratic risk in the event of counterparty default if the portfolio of trades that may have to be 

replaced is diversified.508  As a corollary, a market participant who trades a single security, in a 

single direction, against a given counterparty, may face more idiosyncratic risk in the event of 

                                                 
508  See Ananth Madhavan et al., Risky Business: The Clearance and Settlement of Financial 

Transactions (U. Pa. Wharton Sch. Rodney L. White Ctr. for Fin. Res. Working Paper No. 40-88, 

1988), at 4–5, https://rodneywhitecenter.wharton.upenn.edu/wp-

content/uploads/2014/04/8840.pdf; see also JOHN H. COCHRANE, ASSET PRICING 15 (Princeton 

Univ. Press rev. ed. 2009) (defining the idiosyncratic component of any payoff as the part that is 

uncorrelated with the discount factor). 

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counterparty failure than a market participant who trades in both directions with that counterparty. 

Furthermore, the extent to which a market participant experiences any economic benefits 

that may stem from a shortened standard settlement cycle likely depends on the market 

participant’s relative bargaining power.  While larger intermediaries may experience direct 

benefits from a shorter settlement cycle as a result of being required to post less collateral with a 

CCP, if they do not effectively compete for customers through fees and services as a result of 

market power, they may pass only a portion of these cost savings through to their customers.509   

The Commission believes that the amendment to Rule 15c6-1(a), which shortens the 

standard settlement cycle from T+2 to T+1 may mitigate the market frictions of coordination and 

underinvestment described above.  The Commission believes that by mitigating these market 

frictions, and for the reasons discussed below, the transition to a shorter standard settlement cycle 

will reduce the risks inherent in the clearance and settlement process. 

The shorter standard settlement cycle might also affect the level of operational risk in the 

clearance and settlement system.  Shortening the settlement cycle by one day will reduce the time 

that market participants have to resolve any errors that might occur in the clearance and settlement 

process.  Tighter operational timeframes and linkages required under a shorter standard settlement 

cycle might introduce new fragility that could affect market participants, specifically an increased 

risk that operational issues could affect transaction processing and related securities settlement.510 

                                                 
509  See infra Parts VIII.C.1. (Benefits) and VIII.C.2. (Costs). 

510 For example, the ability to compute an accurate net asset value (“NAV”) within the 

settlement timeframe is a key component for settlement of ETF transactions. See, e.g., 

BARRINGTON PARTNERS, AN EXTRAORDINARY WEEK: SHARED EXPERIENCES FROM INSIDE THE 

FUND ACCOUNTING SYSTEMS FAILURE OF 2015 (Nov. 2015), https://www.mfdf.org/docs/default-

source/fromjoomla/uploads/blog_files/sharedexperiencefromfasystemfailure2015.pdf. 

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In part, to lessen the likelihood that shortening the settlement cycle might negatively affect 

operational risk, the Commission and market participants have emphasized on multiple occasions 

the importance of accelerating the institutional trade clearance and settlement process by 

improving, among other things, the allocation, confirmation, and affirmation processes for the 

clearance and settlement of institutional trades, as well as improvements to the provision of central 

matching and electronic trade confirmation.511  A 2010 white paper by Omgeo (now DTCC ITP), 

published when the standard settlement cycle in the U.S. was still T+3, described same-day 

affirmation as “a prerequisite” of shortening the settlement cycle because of its impact on 

settlement failure rates and operational risk.512  According to previously cited statistics published 

by DTCC in 2011, regarding affirmation rates achieved through industry utilization of a certain 

matching/ETC provider, on average, 45% of trades were affirmed on trade date, 90% were 

affirmed by T+1, and 92% were affirmed by noon on T+2.513  Currently, only about 68% of trades 

achieve affirmation by 12:00 midnight at the end of trade date.514  While these numbers have 

improved over time, the improvements have been incremental and fallen short of achieving an 

affirmed confirmation by the end of trade date as is considered a securities industry best 

practice.515  Accordingly, and as described more fully below, to achieve the maximum efficiency 

                                                 
511  See supra Part III.A.; see also T+1 Proposing Release, supra note 2, at 10452 nn.146–148 

and accompanying text. 

512  Omgeo, Mitigating Operational Risk and Increasing Settlement Efficiency through Same 

Day Affirmation (SDA), at 2, 7 (Oct. 2010) (“Omgeo Study”), 

https://www.sifma.org/resources/thought-leader-resource-type/white-papers/.  

513  DTCC, Proposal to Launch a New Cost-Benefit Analysis on Shortening the Settlement 

Cycle, at 7 (Dec. 2011), supra note 263. 

514  DTCC ITP Forum Remarks, supra note 264.  

515  See T+1 Report, supra note 61, at 5.   

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and risk reduction that may result from completing the allocation, confirmation, and affirmation 

process on trade date, and to facilitate shortening the settlement cycle to T+1 or shorter, the 

Commission is adopting new Rule 15c6-2 under the Exchange Act to facilitate trade date 

completion of institutional trade allocations, confirmations, and affirmations.  Similarly, the 

Commission is also adopting new Rule 17Ad-27 under the Exchange Act to facilitate straight-

through processing by certain clearing agencies acting as CMSPs. 

B. Baseline 

The Commission uses as its economic baseline the clearance and settlement process as it 

exists today.  In addition to the current process that was described in the T+1 Proposing Release, 

the baseline includes rules adopted by the Commission, including Commission rules governing the 

clearance and settlement system, SRO rules,516 as well as rules adopted by regulators in other 

jurisdictions to regulate securities settlement in those jurisdictions.  The following section 

discusses several additional elements of the baseline that are relevant for the economic analysis of 

the amendment to Rule 15c6-1(a) because they are related to the financial risks faced by market 

participants that clear and settle transactions and the specific means by which market participants 

manage these risks. 

1. Central Counterparties 

NSCC, a subsidiary of DTCC, is a clearing agency registered with the Commission that 

                                                 
516  Certain SRO rules currently define “regular way” settlement as occurring on T+2 and, as 

such, would need to be amended in connection with shortening the standard settlement cycle to 

T+1.  See, e.g., MSRB Rule G-12(b)(ii)(B); FINRA Rule 11320(b).  Further, certain timeframes or 

deadlines in SRO rules key off the current settlement date, either expressly or indirectly.  In such 

cases, the SROs may also need to amend these rules.  See T+1 Proposing Release, supra note 2, at 

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operates the CCP for U.S. equity securities transactions.517  One way that NSCC mitigates the 

credit, market, and liquidity risk that it assumes through its novation and guarantee of trades as a 

CCP is by multilateral netting of securities trades’ delivery and payment obligations across its 

members.  By offsetting its members’ obligations, NSCC reduces the aggregate market value of 

securities and cash it must deliver to clearing members.  While netting reduces NSCC’s settlement 

payment obligations by a daily average of 98%,518 it does not fully eliminate the risk posed by 

unsettled trades because NSCC is responsible for payments or deliveries on any trades that it 

cannot fully net.  NSCC reported clearing an average of approximately $2.191 trillion each day 

during the second quarter of 2022,519 suggesting an average net settlement obligation of 

approximately $44 billion each day.520   

The aggregate settlement risk faced by NSCC is also a function of the probability of 

                                                 
517  A second DTCC subsidiary, DTC, also a clearing agency registered with the Commission, 

operates a central securities depository (“CSD”) with respect to securities transactions in the U.S. 

in several types of eligible securities including, among others, equities, warrants, rights, corporate 

debt and notes, municipal bonds, government securities, asset-backed securities, depositary 

receipts, and money market instruments. 

518  According to the DTCC, centralized multilateral netting reduces the value of payments that 

need to be exchanged each day by an average of 98%, and netting is particularly important during 

times of heightened volatility and volume.  DTCC, ADVANCING TOGETHER: LEADING THE 

INDUSTRY TO ACCELERATED SETTLEMENT, at 2 (Feb. 2021) (“DTCC White Paper”), 

https://www.dtcc.com/-/media/Files/PDFs/White%20Paper/DTCC-Accelerated-Settle-WP-

2021.pdf. 

519  See DTCC, Fixed Income Clearing Corporation and National Securities Clearing 

Corporation Public Quantitative Disclosure for Central Counterparties, Q2 2022, at 19 (Sept. 

2022) (“DTCC Quantitative Disclosure Results Q2 2022”), https://www.dtcc.com/-

/media/Files/Downloads/legal/policy-and-compliance/CPMI-IOSCO-Quantitative-Disclosure-

Results-2022Q2-1.pdf. 

520  Calculated as $2.191 trillion × 2% = $43.82 billion.   

https://www.dtcc.com/-/media/Files/PDFs/White%20Paper/DTCC-Accelerated-Settle-WP-2021.pdf
https://www.dtcc.com/-/media/Files/PDFs/White%20Paper/DTCC-Accelerated-Settle-WP-2021.pdf
https://www.dtcc.com/-/media/Files/Downloads/legal/policy-and-compliance/CPMI-IOSCO-Quantitative-Disclosure-Results-2022Q2-1.pdf
https://www.dtcc.com/-/media/Files/Downloads/legal/policy-and-compliance/CPMI-IOSCO-Quantitative-Disclosure-Results-2022Q2-1.pdf
https://www.dtcc.com/-/media/Files/Downloads/legal/policy-and-compliance/CPMI-IOSCO-Quantitative-Disclosure-Results-2022Q2-1.pdf


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clearing member default.  NSCC manages the risk of clearing member default by imposing certain 

financial responsibility requirements on its members.  For example, as of 2022, broker-dealer 

members of NSCC that are not municipal securities brokers, and do not intend to clear and settle 

transactions for other broker-dealers, must have excess net capital of $500,000 over the minimum 

net capital requirement imposed by the Commission, and $1,000,000 over the minimum net capital 

requirement if the broker-dealer member clears for other broker-dealers.521  Furthermore, each 

NSCC member is subject to other ongoing membership requirements, including a requirement to 

furnish NSCC with assurances of the member’s financial responsibility and operational capability, 

including, but not limited to, periodic reports of its financial and operational condition.522 

In addition to managing the member default risk, NSCC also takes steps to mitigate the 

impacts of a member default.  For example, in the normal course of business, CCPs are generally 

not exposed to market or liquidity risk because they expect to receive every security from a seller 

they are obligated to deliver to a buyer, and they expect to receive every payment from a buyer that 

they are obligated to deliver to a seller.  However, when a clearing member defaults, the CCP can 

no longer expect the defaulting member to deliver securities or make payments.  CCPs mitigate 

this risk by requiring clearing members to make contributions of financial resources to the CCP so 

that it may make payments or deliver securities in the event of a member default.  The level of 

                                                 
521  For a description of NSCC’s financial responsibility requirements for registered broker-

dealers, see NSCC Rules and Procedures, at 386 (effective Oct. 3, 2022) (“NSCC Rules and 

Procedures”), https://www.dtcc.com/~/media/Files/Downloads/legal/rules/nscc_rules.pdf.  

Pursuant to Rule 11 and Addendum K to NSCC’s Rules and Procedures, NSCC guarantees the 

completion of Continuous Net Settlement System (“CNS”) settling trades (“NSCC trade 

guaranty”) that have been validated.  Id. at 108-113, 414.   

522  See, e.g., id. at 89. 

https://www.dtcc.com/~/media/Files/Downloads/legal/rules/nscc_rules.pdf


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financial resources CCPs require clearing members to commit may be based on, among other 

things, the market and liquidity risk of a member’s portfolio, the correlation between the assets in 

the member’s portfolio and the member’s own default probability, and the liquidity of the assets 

posted as collateral. 

2. Market Participants – Investors, Broker-Dealers, and Custodians 

As discussed in Part II.B of the proposal, broker-dealers serve both retail and institutional 

customers.523  Aggregate statistics from the Board of Governors of the Federal Reserve System 

suggest that at the end of the second quarter 2022, U.S. households held approximately 40% of the 

value of corporate equity outstanding, 56% of the value of mutual fund shares outstanding, 2% of 

the value of corporate and foreign bonds, and 43% of the value of municipal securities, which 

provides a general picture of the share of holdings by retail investors.524 

In the third quarter of 2022, approximately 3,500 broker-dealers filed FOCUS Reports525 

with FINRA.  These firms varied in size, with median assets of approximately $1.3 million and 

average assets of approximately $1.6 billion.  The top 1% of broker-dealers held 80% of the assets 

of broker-dealers overall, indicating a high degree of concentration in the industry.  Of the 

approximately 3,500 filers, as of the end of 2021, 92 reported self-clearing public customer 

                                                 
523  See T+1 Proposing Release, supra note 2, at 10439–44. 

524  See Board of Governors of the Federal Reserve System, FEDERAL RESERVE STATISTICAL 

RELEASE, Z.1, FINANCIAL ACCOUNTS OF THE UNITED STATES: FLOW OF FUNDS, BALANCE SHEETS, 

AND INTEGRATED MACROECONOMIC ACCOUNTS, at 121, 122, 130 (Sept. 23, 2021), 

https://www.federalreserve.gov/releases/z1/20210923/z1.pdf.  

525  FOCUS Reports, or “Financial and Operational Combined Uniform Single” Reports, are 

monthly, quarterly, and annual reports that broker-dealers generally are required to file with the 

Commission and/or SROs pursuant to Exchange Act Rule 17a-5, 17 CFR 240.17a-5. 

https://www.federalreserve.gov/releases/z1/20210923/z1.pdf


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accounts and acting as introducing broker and sending orders to another broker-dealer for clearing,  

1,114 reported acting only as an introducing broker and sending orders to another broker-dealer for 

clearing , and 68 reported acting as both.526  Broker-dealers that identified themselves as self-

clearing broker-dealers, on average, had higher total assets than broker-dealers that identified 

themselves as introducing broker-dealers.  While the decision to self-clear may be based on many 

factors, this evidence is consistent with the argument that there may currently be high barriers to 

entry for providing clearing services as a broker-dealer. 

Clearing broker-dealers face liquidity risks, as they are obligated to make payments to 

clearing agencies on behalf of customers who purchase securities.  As discussed in more detail 

below, because customers of a clearing broker may default on their payment obligations to the 

broker, particularly when the price of a purchased security declines before settlement, clearing 

broker-dealers routinely seek to reduce the risks posed by their customers.  For example, clearing 

broker-dealers may require customers to contribute financial resources in the form of margin to 

margin accounts, to pre-fund purchases in cash accounts, or may restrict the use of customers’ 

unsettled funds.  These measures are in many ways analogous to measures taken by clearing 

agencies to reduce and mitigate the risks posed by their clearing members.  In addition, clearing 

broker-dealers may also mitigate the risks posed by customers by charging higher transaction fees 

that reflect the value of the customer’s option to default, thereby causing customers to internalize 

the cost of default that is inherent in the settlement process.527  While not directly reducing the risk 

posed by customers to clearing members, these higher transaction fees indirectly reduce that risk 

by allocating to customers a portion of the expected direct costs of customer default. 

                                                 
526  68 filers reported clearing public customer accounts via self clearing and via introducing. 

527  See infra Parts VIII.C.2. and VIII.C.4. 



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Another way the settlement cycle may affect transaction prices involves the potential use of 

funds during the settlement cycle.  To the extent that buyers may use the cash to purchase 

securities during the settlement cycle for other purposes, they may derive value from the length of 

time it takes to settle a transaction.  Testing this hypothesis, studies have found that sellers demand 

compensation for the benefit that buyers receive from deferring payment during the settlement 

cycle and that this compensation is incorporated in equity returns.528   

The settlement process also exposes investors to certain risks.  The length of the settlement 

cycle sets the minimum amount of time between when an investor places an order to sell securities 

and when the customer can expect to have access to the proceeds of that sale.  Investors take this 

into account when they plan transactions to meet liquidity needs.  For example, under T+2 

settlement, investors who experience liquidity shocks, such as unexpected expenses that must be 

met within one day, could not rely on obtaining funding solely through a sale of securities because 

the proceeds of the sale would not typically be available until the end of the second day after the 

sale.  One possible strategy to deal with such a shock under T+2 settlement would be to borrow to 

meet payment obligations on day T+1 and repay the loan on the following day with the proceeds 

from a sale of securities, incurring the cost of one day of interest.  Another strategy that investors 

may use is to hold financial resources to insure themselves from liquidity shocks. 

Some securities transactions depend on an FX transaction to provide the necessary funds.  

When settlement times for FX transactions are longer than that of the securities transaction it is 

                                                 
528  See Victoria Lynn Messman, Securities Processing: The Effects of a T+3 System on 

Security Prices (May 2011) (Ph.D. dissertation, University of Tennessee – Knoxville), 

http://trace.tennessee.edu/utk_graddiss/1002/; Josef Lakonishok & Maurice Levi, Weekend Effects 

on Stock Returns: A Note, 37 J. FIN. 883 (1982), https://www.jstor.org/stable/pdf/2327716.pdf; 

Ramon P. DeGennaro, The Effect of Payment Delays on Stock Prices, 13 J. FIN. RES. 133 (1990), 

http://onlinelibrary.wiley.com/doi/10.1111/j.1475-6803.1990.tb00543.x/abstract. 

http://trace.tennessee.edu/utk_graddiss/1002/
https://www.jstor.org/stable/pdf/2327716.pdf
http://onlinelibrary.wiley.com/doi/10.1111/j.1475-6803.1990.tb00543.x/abstract


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meant to finance, the purchaser may be required to find an alternative source of funds to settle the 

securities transaction.  The Commission is unable to quantify the fraction of securities trades that 

depend on a corresponding FX transaction or the relative frequency with which market participants 

employ alternative methods when FX and securities settlement cycles differ, because it is unaware 

of a source for data on how securities transactions are funded that would be a necessary 

prerequisite to providing a reasonable estimate.  It is the experience of Commission staff that, for 

retail investors, many brokers require their retail clients to prefund their transactions including 

those that require a corresponding FX transaction. 

Integral to settlement of institutional trades is achieving an affirmed confirmation, which 

can require a series of communications between a broker-dealer and its institutional customer.  As 

a general matter, most broker-dealers maintain policies and procedures to ensure the timely 

settlement of their transactions.529  An affirmed confirmation by the end of trade date is considered 

a securities industry best practice.530  Currently, despite existing commercial incentives and 

continuing efforts to promote “same-day affirmation” as an industry best practice, only about 68% 

of trades achieve affirmation on trade date.531   

In order to deliver shares that a customer has sold, it may be necessary for a broker-dealer 

to initiate a bona fide recall of a loaned security to be able to mark the sale of such loaned but 

recalled security “long” for purposes of Rule 200(g)(1).532  Under a T+2 standard settlement cycle, 

the closeout period for sales marked “long” is T+5, and so recalls of loaned securities need to be 

                                                 
529  See, e.g., SIFMA August 26th Letter, supra note 207, at 2. 

530  See T+1 Report, supra note 61, at 5.   

531 See DTCC ITP Forum Remarks, supra note 264. 

532  See T+1 Proposing Release, supra note 2, at 10461. 



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delivered by T+4 to be available to close out any fails on sales marked “long” by the beginning of 

regular trading hours on T+5.  To meet this timeframe, a number of broker-dealers have securities 

lending agreements that set the period of delivery for delivering loaned but recalled securities to 

two settlement days after initiation of a recall.  The recall of a loaned security does not require that 

a reason be given so it is not possible to determine the volume of security loan recalls that are 

initiated in order to complete settlement before the closeout period. 

Rule 15c6-1(c) establishes a T+4 settlement cycle for firm commitment underwritings for 

securities that are priced after 4:30 p.m. Eastern Time (“ET”).533  Under the rule, the broker or 

dealer must effect or enter into a contract for the purchase or sale of those securities that provide 

for payment of funds and delivery of securities no later than the fourth business day after the date 

of the contract unless otherwise expressly agreed to by the parties at the time of the transaction.  

Table 1 provides statistics for the number of initial public offerings of equity and aggregate 

proceeds by year from 2000-2022.  The Commission believes that most equity initial public 

offerings (“IPOs”), particularly larger offerings, are made on a firm commitment basis.  Although 

the Commission is not aware of a comprehensive and accessible database that includes settlement 

time by offering, it understands that the current market practice for substantially all equity offering 

is to settle on the current T+2 timeframe, notwithstanding the exceptions provided in Rule 15c6-

1(c) for firm commitment offerings priced after 4:30 pm ET.534  The third and fourth columns of 

Table 1 contain estimates for total IPO proceeds from separate sources using separate 

methodologies but show similar patterns.  The Commission understands that debt offerings 

                                                 
533  17 CFR 240.15c6-1(c).   

534  See T+1 Report, supra note 61, at 31.  The U.S. moved to the current T+2 settlement in 

September 2017. 



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frequently make use of the exception provided by 15c6-1(d) and that substantially all of the 

purchasers in debt securities offerings are large, sophisticated institutions. 

Table 1.  Number of Initial Public Offerings and Aggregate Proceeds (2000-2022)1 

Year  Number 

of IPOs 

Aggregate Proceeds 

($ Billions) 

Aggregate Proceeds 

SIFMA ($B) 

2000  380 64.80 106.2 

2001  80 35.29 46.0 

2002  66 22.03 27.2 

2003  63 9.54 18.1 

2004  173 31.19 50.5 

2005  159 28.23 40.7 

2006  157 30.48 46.4 

2007  159 35.66 52.3 

2008  21 22.76 26.7 

2009  41 13.17 27.0 

2010  91 29.82 43.5 

2011  81 26.97 40.1 

2012  93 31.11 46.2 

2013  158 41.56 60.0 

2014  206 42.20 93.5 

2015  118 22.00 32.2 

2016  75 12.52 20.7 

2017  106 22.98 39.2 

2018  134 33.47 49.9 

2019  112 39.18 48.8 

2020  165 61.87 85.4 

2021  311 119.36 153.6 

2022  39 7.01 8.5 
1 The second and third columns contain estimates derived from IPOs with an offer price 

of at least $5.00, excluding ADRs, unit offers, closed-end funds, real estate investment 

trusts (“REITs”), natural resource limited partnerships, small best efforts offers, banks 

and savings and loans (S&Ls), and stocks not listed in data maintained by the Center for 

Research in Security Prices (“CRSP” includes Amex, NYSE, and NASDAQ stocks).  

Proceeds exclude overallotment options.  Estimates from IPO Statistics, Jay Ritter, 

University of Florida, at 3, https://site.warrington.ufl.edu/ritter/files/IPO-Statistics.pdf.  

The fourth column provides an estimate by SIFMA of total IPO proceeds using their own 

methodology.  The data is available at https://www.sifma.org/resources/research/us-

equity-and-related-securities-statistics/, but we understand their reported IPO data 

“includes rank eligible deals; excludes BDCs, SPACs, ETFs, CLEFs & rights offers.”  

See SIFMA Research Quarterly –3Q22 (Oct. 2022), at 5, https://www.sifma.org/wp-

content/uploads/2022/10/US-Research-Quarterly-Equity-2022-10-19-SIFMA.pdf.   

 

https://www.sifma.org/wp-content/uploads/2022/10/US-Research-Quarterly-Equity-2022-10-19-SIFMA.pdf
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Custodians hold customers’ securities for safekeeping in order to minimize the risk of the 

misappropriation, misuse, or theft.535  One of the primary responsibilities of a custodian is the 

tracking, settling, and reconciling of assets that are acquired and disposed of by the investor.  In 

this role, custodians affirm up to 70% of institutional trades536 and up to 70% of investment adviser 

trades.537  There are 48 custodian banks that are members of The Depository Trust Company 

(“DTC”).   

3. Investment Companies and Investment Advisers 

Shares issued by investment companies may settle on different timeframes.  For example, 

ETFs, certain closed-end funds, and mutual funds that are sold by brokers generally settle on 

T+2.538  By contrast, mutual fund shares that are directly purchased from the fund generally settle 

on T+1.  Mutual funds that settle on a different basis than the underlying investments currently 

face liquidity risk as a result of a mismatch between the timing of mutual fund share transaction 

settlement and the timing of fund portfolio security transaction order settlements.  Mutual funds 

may manage these particular liquidity needs by, among other methods, using cash reserves, back-

up lines of credit, or interfund lending facilities to provide cash to cover the settlement 

                                                 
535  Although many securities are held in electronic form, e.g., equities at DTC, the custodian 

performs similar functions whether the securities are held in physical or electronic form. 

536  See DTCC ITP Forum Remarks, supra note 264. 

537  See IAA April Letter, supra note 16, at 4; see also ICI Letter, supra note 16, at 5; ISITC 

Letter, supra note 29, at 2. 

538  The Commission applied Rule 15c6-1 to broker-dealer contracts for the purchase and sale 

of securities issued by investment companies, including mutual funds, because the Commission 

recognized that these securities represented a significant and growing percentage of broker-dealer 

transactions.  T+3 Adopting Release, supra note 3, at 52900. 



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mismatch.539  As of the end of 2021, there were 11,577 open-end funds (including money market 

funds and ETFs).540  The assets of these funds were approximately $34.2 trillion.541  Of the 11,577 

funds noted, 2,690 were ETFs with combined assets of $7.2 trillion.542 

Under section 22(e) of the Investment Company Act, an open-end fund generally is 

required to pay shareholders who tender shares for redemption within seven days of their tender.543  

Open-end fund shares that are sold through broker-dealers must be redeemed within two days of a 

redemption request because broker-dealers are subject to Rule 15c6-1(a). 

Furthermore, 17 CFR 270.22c-1,544 the “forward pricing” rule, requires funds, their 

principal underwriters, and dealers to sell and redeem fund shares at a price based on the current 

NAV next computed after receipt of an order to purchase or redeem fund shares, even though cash 

proceeds from purchases may be invested or fund assets may be sold in subsequent days in order to 

satisfy purchase requests or meet redemption obligations. 

                                                 
539  See Open-End Fund Liquidity Risk Management Programs; Swing Pricing; Re-Opening of 

Comment Period for Investment Company Reporting Modernization Release, Investment 

Company Act Release No. 31835 (Sept. 22, 2015), 80 FR 62274, 62285 n.100 (Oct. 15, 2015). 

540  See ICI, 2022 INVESTMENT COMPANY FACT BOOK, A REVIEW OF TRENDS AND ACTIVITIES 

IN THE INVESTMENT COMPANY INDUSTRY, at 21 (2022) (“2022 ICI Fact Book”), 

https://www.icifactbook.org/pdf/2022_factbook.pdf.  This comprises 8,887 open-end mutual 

funds, including mutual funds that invest primarily in other mutual funds, and 2,690 ETFs, 

including ETFs that invest primarily in other ETFs. 

541  See id. at 22. 

542  See id. 

543  15 U.S.C. 80a–22(e). 

544  Rule 22c-1 under the Investment Company Act. 

https://www.icifactbook.org/pdf/2022_factbook.pdf


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Based on Form ADV filings received through August 31, 2022, the Commission estimates 

that there are approximately 15,160 advisers registered with the Commission are required to make 

and keep copies of books and records relating to their advisory business.545  For any transaction 

that is subject to the requirements of Rule 15c6-2(a), the final amendments to Rule 204-2 will 

require registered investment advisers to make and keep copies of confirmations received, and any 

allocation and each affirmation sent or received, with a date and time stamp for each allocation and 

affirmation that indicates when the allocation and affirmation was sent or received.  The 

Commission understands that not all investment advisers may engage in transactions that are 

subject to the requirements of Rule 15c6-2(a).546  Of the 15,160 advisers registered with the 

Commission, we estimate that 12,991 manage institutional accounts and are thus likely to facilitate 

transactions that are subject to the requirements of Rule 15c6-2(a).547   

One commenter stated that timestamps are already included in electronic communications 

protocols.548  As discussed in Part IV.C, the Commission believes that timestamps are generally 

included in many electronic communications and many advisers currently send allocations and 

affirmations electronically, though some advisers may not retain these types of records.   

4. Current Market for Clearance and Settlement Services 

As described in Part II.B of the proposal, two affiliated entities, NSCC and DTC, facilitate 

                                                 
545  See infra note 4 to Table 2. 

546  For more discussion, see infra Part IX.A. 

547  See infra note 4 to Table 2. 

548  See FIX Trading Letter, supra note 218; cf. a separate commenter stated “Additional 

requirements for registered investment advisers to timestamp certain trading records adds further 

complexity and cost to those managers’ efforts.”  See AIMA Letter, supra note 29, at 2. 



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clearance and settlement activities in U.S. securities markets in most instances.549  There is limited 

competition in the provision of the services that these entities provide.  NSCC is the CCP for 

trades between broker-dealers involving equity securities, corporate and municipal debt, and UITs 

for the U.S. market.  DTC is the CSD that provides custody and book-entry transfer services for 

the vast majority of securities transactions in the U.S. market involving equities, corporate and 

municipal debt, money market instruments, ADRs, and ETFs.  CMSPs electronically facilitate 

communication among a broker-dealer, an institutional investor or its investment adviser, and the 

institutional investor’s custodian to reach agreement on the details of a securities trade, thereby 

creating binding terms.550  As discussed further in Part III.D of the T+1 Proposing Release, FINRA 

currently requires broker-dealers to use a clearing agency, such as DTC or a CMSP, or a qualified 

vendor under the rule to complete delivery-versus-payment transactions with their customers.551 

In addition, a CMSP may offer a “matching” process by which it compares and reconciles 

the broker-dealer’s trade details with the institutional investor’s trade details to determine whether 

the two descriptions of the trade agree, at which point it can generate an affirmation to effect 

settlement of the trade.  As part of such process, the CMSP may offer services that can assist with 

the automated identification of trades that do not match, allowing market participants to identify 

errors and remediate any trade information that does not match.  Market participants also rely on a 

                                                 
549  See T+1 Proposing Release, supra note 2, at 10439–40. 

550  See id.; see also T+2 Proposing Release, supra note 4, at 69246.  Although there are three 

CMSPs, only one is active.  That CMSP currently submits nonpublic monthly reports that include 

data on monthly trade volume processed and affirmations completed on T, T+1, and settlement 

date. 

551  See T+1 Proposing Release, supra note 2, at 10458 n.181 and accompanying text. 



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variety of “local” matching tools that allow them to compare trade information received from 

another party against their own trade information.552  These local matching tools often rely on 

inconsistent SSI data independently maintained by broker-dealers, investment managers, 

custodians, sub-custodians, and agents on separate databases.553  As discussed in Part II.B., 

processing institutional trades requires managing the back and forth involved with transmitting and 

reconciling trade information among the parties, functionally matching and re-matching with the 

counterparties to the trade, as well as custodians and agents, to facilitate settlement.  It also 

requires market participants to engage in allocation processes, such as allocation-level 

cancellations and corrections, some of which are still processed manually.554   

Broker-dealers compete to provide services to retail and institutional customers.  Based on 

the large number of broker-dealers, there is likely a high degree of competition among broker-

dealers.  However, the markets that broker-dealers serve may be segmented along lines relevant for 

the analysis of competitive effects of the amendment to Rule 15c6-1(a).  As noted above, the 

                                                 
552  Local matching platforms include, for example, the trade reconciliation and inventory 

management tools that market participants use to reconcile trade information.  See DTCC, 

EMBRACING POST-TRADE AUTOMATION: SEVEN WAYS THE SELL-SIDE WILL BENEFIT FROM NO-

TOUCH FUTURE (Nov. 2020) (“DTCC Embracing Post-Trade Automation”), 

https://www.dtcc.com/itp-hub/dist/downloads/broker_supplement_11.11.20z.pdf.  Examples of 

such service providers include Bloomberg, Corfinancial, Lightspeed, and SS&C Technologies. 

553  See id. for more information about the use and impact of “local” matching platforms.  A 

2020 DTCC survey of global broker-dealers found that certain institutional post-trade processing 

costs could be reduced by 20-25% through leveraging post-trade automation, which would in turn 

eliminate redundancies and manual processing and mitigate operational risks.  See DTCC, DTCC 

Identifies Seven Areas of Broker Cost Savings as a Result of Greater Post-Trade Automation (Nov. 

18, 2020), https://www.dtcc.com/news/2020/november/18/dtcc-identifies-seven-areas-of-broker-

cost-savings-as-a-result-of-greater-post-trade-automation.   

554  See DTCC, RE-IMAGINING POST-TRADE: NO-TOUCH PROCESSING WITHIN REACH, at 4 

(Sept. 2019), https://www.dtcc.com/-/media/Files/Downloads/Institutional-Trade-Processing/ITP-

Story/DTCC-Re-Imagining-Post-Trade.pdf.  

https://www.dtcc.com/itp-hub/dist/downloads/broker_supplement_11.11.20z.pdf
https://www.dtcc.com/news/2020/november/18/dtcc-identifies-seven-areas-of-broker-cost-savings-as-a-result-of-greater-post-trade-automation
https://www.dtcc.com/news/2020/november/18/dtcc-identifies-seven-areas-of-broker-cost-savings-as-a-result-of-greater-post-trade-automation
https://www.dtcc.com/-/media/Files/Downloads/Institutional-Trade-Processing/ITP-Story/DTCC-Re-Imagining-Post-Trade.pdf
https://www.dtcc.com/-/media/Files/Downloads/Institutional-Trade-Processing/ITP-Story/DTCC-Re-Imagining-Post-Trade.pdf


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number of broker-dealers that self-clear public customer accounts is smaller than the set of broker-

dealers that introduce and do not self-clear.  This could mean that introducing broker-dealers 

compete more intensively for customers than clearing broker-dealers.  Further, clearing broker-

dealers must meet requirements set by NSCC and DTC, such as financial responsibility 

requirements and clearing fund requirements.  These requirements represent barriers to entry for 

brokers that may wish to become clearing broker-dealers, limiting competition among such 

entities. 

Competition for customers affects how the costs associated with the clearance and 

settlement process are allocated among market participants.  In managing the expected costs of 

risks from their customers and the costs of compliance with SRO and Commission rules, clearing 

broker-dealers decide what fraction of these costs to pass through to their customers in the form of 

fees and margin requirements, and what fraction of these costs to bear themselves.  The level of 

competition that a clearing broker-dealer faces for customers will dictate the extent to which it is 

able to pass these costs through to its customers. 

In addition, several factors affect the current levels of efficiency and capital formation in 

the various functions that make up the market for clearance and settlement services.  First, at a 

general level, market participants occupying various positions in the clearance and settlement 

system must post or hold liquid financial resources, and the level of these resources is a function of 

the length of the settlement cycle.  For example, NSCC collects clearing fund contributions from 

members to help ensure that it has sufficient financial resources in the event that one of its 

members defaults on its obligations to NSCC.  As discussed above, the length of the settlement 

cycle is one determinant of the size of NSCC’s exposure to clearing members.  As another 

example, mutual funds may manage liquidity needs by, among other methods, using cash reserves, 



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back-up lines of credit, or interfund lending facilities to provide cash.  These liquidity needs, in 

turn, are related to the mismatch between the timing of mutual fund transaction order settlements 

and the timing of fund portfolio security transaction order settlements. 

Holding liquid assets solely for the purpose of mitigating counterparty risk or liquidity 

needs that arise as part of the settlement process could represent an allocative inefficiency.  That is, 

because firms that are required to hold these assets might prefer to put them to alternative uses, and 

because these assets may be more efficiently allocated to other market participants who value them 

for their fundamental risk and return characteristics rather than for their value as collateral.  To the 

extent that any intermediaries between buyer and seller, who facilitate clearance and settlement of 

the trade, bear costs as a result of inefficient allocation of collateral assets, these inefficiencies may 

be reflected in higher transaction costs. 

The settlement cycle may also have more direct impacts on transaction costs.  As noted 

above, clearing broker-dealers may charge higher transaction fees to reflect the value of the 

customer’s option to default and these fees may cause customers to internalize the cost of the 

default options inherent in the settlement process.  However, these fees also make transactions 

more costly and may influence the willingness of market participants to efficiently share risks or to 

supply liquidity to securities markets.  Taken together, inefficiencies in the allocation of resources 

and risks across market participants may serve to impair capital formation. 

Finally, market participants may make processing errors in the clearance and settlement 

process.555  Market participants have stated that manual processing and a lack of automation result 

                                                 
555  See, e.g., Omgeo Study, supra note 512, at 12; see also T+1 Report, supra note 61, at 26. 



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in processing errors.556  Although some of these errors may be resolved within the settlement cycle 

and not result in a failed trade, those that are not may result in failed trades, which appear in the 

failure to deliver data.557  Further, market participants may incorporate the likelihood that 

processing errors result in delays in payments or deliveries into securities prices.558  Figure 1 

shows total fails to deliver in shares at mid-month and end-of-month from January 2016 through 

mid-December 2022.  The change in the U.S. settlement cycle from T+3 to T+2 became effective 

in September 2017.  Although processing errors are only one reason a trade may result in a fail to 

deliver, there is no marked change in the fails data around the previous shortening of the settlement 

cycle.   

  

                                                 
556  Matthew Stauffer, Managing Director, Head of Institutional Trade Processing at DTCC, 

stated, “The findings of our survey highlight the benefits of leveraging automated post-trade 

solutions to reduce the costs of operational functions and the risk inherent in manual processes.”  

See DTCC Identifies Seven Areas of Broker Cost Savings as a Result of Greater Post-Trade 

Automation, supra note 524. 

557  See Statement by The Depository Trust & Clearing Corporation, U.S. Securities and 

Exchange Commission Securities Lending and Short Sales Roundtable, at 3 (Sept. 30, 2009), 

https://www.sec.gov/comments/4-590/4590-32.pdf; see also T+1 Report, supra note 61, at 26. 

558  See Messman, supra note 528. 

https://www.sec.gov/comments/4-590/4590-32.pdf


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Figure 1.  Outstanding fails to deliver in shares. 

Total fails-to-deliver in shares represents the aggregate net balance of shares that failed to be 

delivered as of the last trading day prior to mid-month and the last trading day prior to the end of 

the month recorded in the NSCC CNS system.  “Share Price>$1” or “Share Price greater than $1” 

includes only fails-to-deliver for shares with a closing price greater than $1 as of the end of the 

period.  The data is available at https://www.sec.gov/data/foiadocsfailsdatahtm. 

 

C. Analysis of Benefits, Costs, and Impact on Efficiency, Competition, and Capital 

Formation 

1. Benefits 

Several commenters noted that shortening the settlement cycle would reduce the risks 

associated with the settlement cycle.559  Shortening the settlement cycle should reduce both the 

                                                 
559  See supra notes 497–502. 



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aggregate market value of all unsettled trades and the amount of time that CCPs, or the 

counterparties to a trade, may be subject to market and credit risk from an unsettled trade.560  First, 

holding transaction volumes constant, the market value of transactions awaiting settlement at any 

given point in time under a T+1 settlement cycle will be approximately one half lower than under 

the current T+2 settlement cycle.  Using the risk mitigation framework described in Part VIII.B.1, 

based on published statistics from the second quarter of 2022,561 and holding average dollar 

volumes constant, the aggregate notional value of unsettled transactions at NSCC is estimated to 

fall from nearly $88 billion to approximately $44 billion.562 

Second, a market participant that experiences counterparty default and enters into a new 

transaction under a T+2 settlement cycle is exposed to more market risk than would be the case 

under a T+1 settlement cycle.  As a result, market participants that are exposed to market, credit, 

and liquidity risks would be exposed to less risk under a T+1 settlement cycle.  This reduction in 

risk may also extend to mutual fund transactions conducted with broker-dealers that currently 

settle on a T+2 basis.563  To the extent that these transactions currently give rise to counterparty 

risk exposures between mutual funds and broker-dealers, these exposures may decrease as a 

consequence of a shorter settlement cycle.  In addition, a shorter standard settlement cycle should 

reduce liquidity risks that could arise by allowing investors to obtain the proceeds of securities 

                                                 
560  See T+1 Proposing Release, supra note 2, at 10447–48.  

561  See DTCC Quantitative Disclosure Results Q2 2022, supra note 519, at 14.  

562  See id. at 20.  

563  In today’s environment, ETFs and certain closed-end funds clear and settle on a T+2 basis.  

Open-end funds (i.e., mutual funds) generally settle on a T+1 basis, except for certain retail funds 

which typically settle on T+2.  Thus, the proposed amendment to Rule 15c6-1(a) would require 

ETFs, closed-end funds, and mutual funds settling on a T+2 basis to revise their settlement 

timeframes.   



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transactions sooner.  These risks affect all market participants, are difficult to diversify away, and 

require resources to manage and mitigate.   

CCPs require clearing members to post financial resources in order to secure members’ 

obligations to deliver cash and securities to the CCP.  Clearing members in turn impose fees on 

their customers, e.g., introducing broker-dealers, institutional investors, and retail investors.  The 

margin requirements required by the CCP are a function of the risk posed to the CCP by the 

potential default of the clearing member.  That risk is a function of several factors including the 

value of trades submitted for clearing but not yet settled, and the volatility of the securities prices 

that make up those unsettled trades.  As these factors are an increasing function of the time to 

settlement, by reducing settlement from T+2 to T+1, a CCP may require less collateral from its 

members, and the CCP’s members may, in turn, reduce fees that they may pass down to other 

market participants, including introducing broker-dealers, institutional investors, and retail 

investors. 

Any reduction in clearing broker-dealers’ required margin should provide multiple benefits.  

First, financial resources that are used to mitigate the risks of the clearance and settlement process 

can be put to alternative uses.  Reducing the financial risks associated with the overall clearance 

and settlement process should reduce the amount of collateral required to mitigate these risks, 

which should reduce the costs that market participants bear to manage and mitigate these risks, and 

the allocative inefficiencies that may stem from risk management practices.564  Second, assets that 

are valuable because they are particularly suited to meeting financial resource obligations may be 

better allocated to market participants that hold these assets for their fundamental risk and return 

                                                 
564  See supra Part VIII.B. (further discussing financial resources collected to mitigate and 

manage financial risks). 



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characteristics.  This improvement in allocative efficiency may improve capital formation. 

A portion of the savings from less costly risk management under a T+1 standard settlement 

cycle relative to a T+2 standard settlement cycle may flow through to investors.  Investors may be 

able to profitably redeploy financial resources that were once needed to fund higher clearing fees, 

for example. 

Market participants might also individually benefit through reduced clearing fund deposit 

requirements.  In 2012, the BCG Study estimated that cost reductions related to reduced clearing 

fund contributions resulting from moving from a T+3 to a T+2 settlement cycle would amount to 

$25 million per year.565  In addition, a shorter settlement cycle might reduce liquidity risk by 

allowing investors to obtain the proceeds of their securities transactions sooner.  Reduced liquidity 

risk may be a benefit to individual investors, but it may also reduce the volatility of securities 

markets by reducing liquidity demands in times of adverse market conditions, potentially reducing 

the correlation between market prices and the risk management practices of market participants.566 

                                                 
565  See The Boston Consulting Group (“BCG”), COST BENEFIT ANALYSIS OF SHORTENING THE 

SETTLEMENT CYCLE, at 10 (Oct. 2012) (“BCG Study”), https://1library.net/document/ynm3kx1z-

cost-benefit-analysis-of-shortening-the-settlement-cycle.html.  According to SIFMA, average daily 

trading volume in U.S. equities grew from $253.1B in 2011 to $564.7B in 2021, an increase of 

123%.  See CBOE EXCHANGE, INC., AND SIFMA, US EQUITIES AND RELATED STATISTICS (Dec. 1, 

2022), https://www.sifma.org/resources/research/us-equity-and-related-securities-statistics/us-

equities-and-related-statistics-sifma/.  Price volatility, as measured by the standard deviation of the 

price, is concave in time, which means that as a period of time increases, volatility will increase, 

but at a decreasing rate.  This suggests that the reduction in price volatility from moving from T+2 

settlement to T+1 settlement is larger than the reduction in price volatility from moving from T+3 

settlement to T+2 settlement.  These two facts suggest that the estimated reduction in clearing fund 

contributions would be more than $25 million per year. 

566  See Peter F. Christoffersen & Francis X. Diebold, How Relevant is Volatility Forecasting 

for Financial Risk Management?, 82 REV. ECON. & STAT. 12 (2000), 

http://www.mitpressjournals.org/doi/abs/10.1162/003465300558597#.V6xeL_nR-JA. The paper 

https://1library.net/document/ynm3kx1z-cost-benefit-analysis-of-shortening-the-settlement-cycle.html
https://1library.net/document/ynm3kx1z-cost-benefit-analysis-of-shortening-the-settlement-cycle.html
https://www.sifma.org/resources/research/us-equity-and-related-securities-statistics/us-equities-and-related-statistics-sifma/
https://www.sifma.org/resources/research/us-equity-and-related-securities-statistics/us-equities-and-related-statistics-sifma/
http://www.mitpressjournals.org/doi/abs/10.1162/003465300558597#.V6xeL_nR-JA


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Shortening the settlement cycle may reduce incentives for investors to trade excessively in 

times of high volatility.567  Such incentives exist because investors do not always bear the full cost 

of settlement risk for their trades.  Broker-dealers incur costs in managing settlement risk with 

CCPs.  Broker-dealers can set their fees so that they recover the average cost of risk management 

from their customers, but those fees depend on a variety of factors that impact settlement risk.  If a 

particular trade has above-average settlement risk, such as when market prices are unusually 

volatile, broker-dealers may not be able to adjust fees to reflect the higher marginal cost.  In 

extreme cases, broker-dealers may prevent a customer from trading.568  Shortening the settlement 

cycle reduces the cost of risk management and should reduce any such incentives to trade more 

than they otherwise would if they bore the full cost of settlement risk for their trades.   

The benefits of harmonized settlement cycles may also accrue to mutual funds.  As 

described above,569 transactions in mutual fund shares typically settle on a T+1 basis even when 

transactions in their portfolio securities settle on a T+2 basis.  As a result, there is a one-day 

mismatch between when these funds make payments to shareholders that redeem shares and when 

the funds receive cash proceeds for portfolio securities they sell.  This mismatch represents a 

source of liquidity risk for mutual funds.  Shortening the settlement cycle by one day will mitigate 

                                                 

shows that volatility can be predicted in the short run, and concludes that short run forecastable 

volatility would be useful for risk management practices. 

567  See Sam Schulhofer-Wohl, Externalities in Securities Clearing and Settlement: Should 

Securities CCPs Clear Trades for Everyone? (Fed. Res. Bank Chi. Working Paper No. 2021-02, 

2021). 

568  This occurred in January 2021 following heightened interest in certain “meme” stocks.  See 

T+1 Proposing Release, supra note 2, at 10438–39.; see also STAFF REPORT ON EQUITY AND 

OPTIONS MARKET STRUCTURE CONDITIONS IN EARLY 2021, at 31–35 (Oct. 14, 2021), 

https://www.sec.gov/files/staff-report-equity-options-market-struction-conditions-early-2021.pdf.   

569  See supra note 563; see also supra Part VIII.B.3. 

https://www.sec.gov/files/staff-report-equity-options-market-struction-conditions-early-2021.pdf


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the liquidity risk due to this mismatch.  As a result, mutual funds that settle on a T+1 basis may be 

able to reduce the size of cash reserves or the size of back up credit facilities that some currently 

use to manage liquidity risk from the mismatch in settlement cycles.  Further, mutual funds may be 

able to invest incoming cash more quickly when funds have net subscriptions, because the 

settlement time for the purchase of fund shares will be aligned with the settlement time for 

portfolio investments, thus allowing funds to maximize their exposure to their defined investment 

strategies. 

  Adoption of a T+1 standard settlement cycle could also have the second-order, longer-

term benefit to U.S. investors of incentivizing other jurisdictions to emulate U.S. markets in 

adopting a standard settlement time of T+1.  By virtue of U.S. capital markets’ prominent role in 

global finance, a transition to a shorter settlement cycle would act as an incentive for other 

jurisdictions to also compress their settlement times to match U.S. processing times.  This would 

be a product of non-U.S. jurisdictions’ desire to reduce transactions costs attendant to settlement 

mismatches.570  As a result, U.S. investors who deploy capital abroad would enjoy the benefits of 

compressed settlement times that the Commission has already described for the domestic T+1 

settlement framework: lower market, credit and liquidity risks; and additional capital efficiencies 

via lower margin and clearing fund deposit requirements.  In addition, a migration to T+1 in other 

jurisdictions would reduce the settlement mismatch costs described below in Part VIII.C.2. 

The Commission believes that these benefits are unlikely to be substantially mitigated by 

                                                 
570  See, e.g., ASSOCIATION FOR FINANCIAL MARKETS IN EUROPE, T+1 SETTLEMENT IN EUROPE: 

POTENTIAL BENEFITS AND CHALLENGES, at 4 (Sept. 2022), stating “Given that some major 

jurisdictions will be adopting T+1, the end users of capital markets – companies seeking to issue 

capital and consumers seeking to invest capital – may benefit from Europe following the same 

approach. This would also avoid a potential gap in the perceived competitiveness of European 

markets vis-à-vis its global peers.” 



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the exceptions to Rule 15c6-1(a) discussed in Part II.A.  Market participants that rely on Rule 

15c6-1(b) in order to transact in limited partnership interests that are not listed on an exchange or 

for which quotations are not disseminated through an automated quotation system of a registered 

securities association are likely to continue to rely on the exception after the Commission adopts 

the amendment to Rule 15c6-1(a).  Similarly, those that rely on the exemption from Rule 15c6-1 

for securities that do not have facilities for transfer or delivery in the U.S. are likely to continue to 

do so, as indicated by the public comments urging the Commission to retain this exemption.571  

There may be transactions covered by Rule 15c6-1(b) that in the past did not make use of this 

exception because they settled within two business days, but that may require use of this exception 

under the amendment to paragraph (a) of the rule because they require more than one business day 

to settle.  However, the Commission did not receive public comments on this point, and does not 

have data on whether transactions that previously did not make use of the exemption might now do 

so. 

Finally, the extent to which different types of market participants experience any benefits 

that stem from the amendment to Rule 15c6-1(a) may depend on their market power.  As discussed 

in the proposing release,572 the clearance and settlement system involves a number of 

intermediaries that provide a range of services between the ultimate buyer and seller of a security.  

Those market participants that have a greater ability to negotiate with customers or service 

providers may be able to retain a larger portion of the operational cost savings from a shorter 

settlement cycle than others, as they may be able to use their market power to avoid passing along 

the cost savings to their clients. 

                                                 
571  See discussion in sections II.B.5 and II.C.6.   

572  See T+1 Proposing Release, supra note 2, at 10439–44. 



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Although the Commission proposed deleting Rule15c6-1(c), it is instead, for the reasons 

discussed above, amending paragraph (c) of Exchange Act Rule 15c6-1 to shorten the settlement 

cycle for firm commitment offerings for securities that are priced after 4:30 p.m. ET, unless 

otherwise expressly agreed to by the parties at the time of the transaction.573 

As discussed in the proposing release, paragraph (c) is rarely used in the current T+2 

settlement environment, but the IWG expects a T+1 standard settlement cycle would increase 

reliance on paragraph (c).574  The Commission is persuaded by comments stating that a T+1 

settlement cycle is not sufficiently long enough to prevent firm commitment offerings priced after 

4:30 p.m. ET from failing to settle on time, and the Commission acknowledges that paragraphs (a) 

and (d) of Rule 15c6-1 would not allow parties to agree to a longer settlement cycle when 

circumstances, unforeseen at the time of the pricing of the transaction, arise that prevent settlement 

on T+1.  The Commission further acknowledges that, while paragraphs (a) and (d) allow parties to 

agree to a longer settlement cycle, in order for the parties to avail themselves of that extended 

settlement date, they must reach that agreement at the time of the transaction. 

The Commission believes that amending Rule 15c6-1(c) as discussed in Part II.C.4 above 

will realize the benefits of shortening the settlement cycle discussed above for the specific 

transactions covered by paragraph (c) while allowing an extra day to resolve issues unanticipated 

at the time of the transaction.  According to one commenter, it is not unusual for unanticipated 

issues relating to transfer agents, legend removal, local law matters (including local court 

                                                 
573  See T+1 Proposing Release, supra note 2, at 10449–50.  

574  T+1 Report, supra note 61, at 33–35. 



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approval), medallion guarantees or non-U.S. parties to arise.575  Such unanticipated issues could 

lead to increased failures to settle trades on a T+1 basis with respect to firm commitment offerings.   

In addition to the amendments to Rule 15c6-1(a) and (c), the Commission is adopting three 

rules applicable, respectively, to broker-dealers, investment advisers, and CMSPs to improve the 

efficiency of managing the processing of institutional trades under the shortened timeframes that 

will be available in a T+1 environment.  First, the Commission had proposed new Rule 15c6-2 to 

require that, where parties have agreed to engage in an allocation, confirmation, or affirmation 

process, a broker or dealer would be prohibited from effecting or entering into a contract for the 

purchase or sale of a security (other than an exempted security, a government security, a municipal 

security, commercial paper, bankers’ acceptances, or commercial bills) on behalf of a customer, 

unless such broker or dealer has entered into a written agreement with the customer that requires 

the allocation, confirmation, affirmation, or any combination thereof, be completed as soon as 

technologically practicable and no later than the end of the day on trade date in such form as may 

be necessary to achieve settlement in compliance with Rule 15c6-1(a).576  The Commission is 

adopting a modified new Rule 15c6-2 that, in addition to technical changes,577 and for the reasons 

discussed in Part III.C.2 above, modifies the proposed rule by adding a new paragraph (a), under 

which a broker-dealer can determine either to enter into written agreements, or establish, maintain, 

and enforce written policies and procedures reasonably designed to ensure completion of the 

allocation, confirmation, affirmation, or any combination thereof, for a transaction as soon as 

                                                 
575  See supra Part II.B.3. for detailed description of comment letters urging the Commission to 

adopt a T+2 settlement cycle for firm commitment offerings for securities that are priced after 4:30 

p.m. ET, unless otherwise expressly agreed to by the parties at the time of the transaction. 

576  See T+1 Proposing Release, supra note 2, at 10453; see also supra Part III.A. 

577  See supra Part III.C.1. 



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technologically practicable, and no later than the end of the day on trade date, in such form as 

necessary to achieve settlement.   

The Commission believes that implementing a T+1 standard settlement cycle, as well as 

any potential further shortening beyond T+1, will necessitate increases in same-day affirmation 

rates because same-day affirmations will be critical to achieving timely T+1 settlement.578  In this 

way, the Commission also believes that new Rule 15c6-2 should facilitate timely settlement as a 

general matter because it will accelerate the transmission and affirmation of trade data to trade 

date, improving the accuracy and efficiency of institutional trade processing, and reducing the 

potential for settlement failures.  The Commission further anticipates that proposed Rule 15c6-2 

will likely stimulate further development of automated and standardized practices among market 

participants more generally, particularly those that currently rely on manual processes to achieve 

settlement.   

Although same-day affirmation is considered a best practice for institutional trade 

processing, this practice is not universal across market participants or even across all trades entered 

by a given participant.579  As discussed in Part VIII.B above, the collection of redundant, often 

manual steps and the use of uncoordinated (i.e., not standardized) databases can lead to delays, 

exceptions processing, settlement fails, wasted resources, and economic losses.  The Commission 

believes that proposed Rule 15c6-2 should increase the percentage of trades that achieve an 

                                                 
578 See supra note 262. 

579  See supra Part III.B.1. for a discussion of comments that argue that commercial incentives 

to achieve timely trade allocations, confirmations, and affirmations already exist.  Although the 

Commission agrees that the incentives identified by commenters exist and help ensure timely 

settlement, the Commission believes that these incentives alone are insufficient to significantly 

improve same-day affirmation rates, as required to facilitate shortening the standard settlement 

cycle to T+1. 



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affirmed confirmation on trade date and should help facilitate an orderly transition to T+1.  

Proposed Rule 15c6-2 would also improve the efficiency of the settlement cycle by incentivizing 

market participants to commit to operational and technological upgrades that facilitate same-day 

affirmation to eliminate, among other things, manual operations, while also reducing operational 

risk, discouraging the use of “just in time” solutions, and promoting readiness for shortening the 

settlement cycle.580   

Second, the Commission is amending the recordkeeping obligations of investment advisers 

to ensure that they are properly documenting their related allocations and affirmations, as well as 

the confirmations they receive from their broker-dealers.581  The amendment to Rule 204-2 

requires advisers to time and date stamp records of any allocation and each affirmation with 

respect to any securities transaction that is subject to the requirements of Rule 15c6-2(a).  The 

Commission believes that the timing of communicating allocations to the broker or dealer is a 

critical pre-requisite to help ensure that confirmations can be issued in a timely manner, and 

affirmation is the final step necessary for an adviser to acknowledge agreement on the terms of the 

trade or alert the broker or dealer of a discrepancy.  The Commission believes the recordkeeping 

requirements should help establish that obligations to achieve a matched trade have been met.  

Requiring the retention of these records also is important for the Commission staff’s use in its 

regulatory and examination program and will be helpful for the Commission to monitor the 

transition from T+2 to T+1.  Moreover, the amendments to Rule 204-2 are intended to reduce risk 

following the transition to T+1 by improving affirmation rates.   

                                                 
580  See discussion in section III.B.5. and supra note 294 and accompanying text. 

581  See supra Part IV.C. 



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Finally, the Commission is adopting a requirement for CMSPs to establish, implement, 

maintain, and enforce written policies and procedures reasonably designed to facilitate straight-

through processing.582  Under the rule, a CMSP facilitates straight-through processing when its 

policies and procedures enable its users to minimize, to the greatest extent that is technologically 

practicable, the need for manual input of trade details or manual intervention to resolve errors and 

exceptions that can prevent settlement of the trade.583   

The Commission believes that increasing the usage of CMSPs can reduce costs and risks 

associated with processing institutional trades and improve the efficiency of the national clearance 

and settlement system.584  CMSPs have become increasingly connected to a wide variety of market 

participants in the U.S. and elsewhere,585 increasing the need to reduce risks and inefficiencies that 

may result from use of a CMSPs’ systems.  The Commission believes the new rule will better 

position CMSPs to provide services that not only reduce the risk inherent in manual processing, 

but also help facilitate an orderly transition to a T+1 standard settlement cycle, as well as potential 

further shortening of the settlement cycle in the future.586  The new requirement supports some of 

the benefits derived from a shortening of the settlement cycle, and mitigates any subsequent 

                                                 
582  See supra Part V.C.; see also T+1 Proposing Release, supra note 2, at 10458 (further 

discussing the term “straight-through processing”). 

583  See T+1 Proposing Release, supra note 2, at 10458. 

584  See supra note 539 and accompanying discussion of processing errors.   

585  See DTCC, About DTCC Institutional Trade Processing, 

https://www.dtcc.com/about/businesses-and-subsidiaries/dtccitp (noting that DTCC ITP, parent to 

DTCC ITP Matching, serves 6,000 financial services firms in 52 countries).  

586  See supra Part V.C. for related discussion.  

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potential increase in fails that may be caused by the reduced time to remediate any errors in trades. 

New Rule 17Ad-27 also requires a CMSP to submit every twelve months to the 

Commission a report that describes the following: (i) a summary of the CMSP’s current policies 

and procedures for facilitating straight-through processing;587 (ii) a qualitative description of its 

progress in facilitating straight-through processing during the twelve month period covered by the 

report;588 (iii) a quantitative presentation of data that includes six specified sets of data;589 (iv) 

requirements concerning quantitative data organization and categorization;590 and (v) the steps the 

CMSP intends to take to facilitate and promote straight-through processing during the twelve 

month period that follows the period covered by the report.591  The new requirement also informs 

                                                 
587  See supra Part V.C.2.a). 

588  See supra Part V.C.2.b). 

589  See supra Part V.C.2.c).  Specifically, Rule 17Ad-27(b)(3) requires the CMSP to provide 

data that includes (i) the total number of trades submitted to the clearing agency for processing; (ii) 

the total number of allocations submitted to the clearing agency; (iii) the total number of 

confirmations submitted to the clearing agency, as well as the total number of confirmations 

cancelled by a user; (iv) the percentage of confirmations submitted to the clearing agency that are 

affirmed on trade date, specifying to the extent practicable the time of affirmation on trade date; 

(v) the percentage of allocations and confirmations submitted to the clearing agency that are 

matched and automatically confirmed through the clearing agency’s services; and (vi) metrics 

concerning the use of manual and automated processes by the CMSP’s users with respect to the 

CMSP’s services that may be used to assess progress in facilitating STP. 

590  See supra Part V.C.2.d).  Specifically, Rule 17Ad-27(b)(4) requires the CMSP to submit, 

pursuant to paragraph (b)(4), the data sets required under paragraph (b)(3) of the new rule and 

which must be:  (i) organized on a month-by-month basis beginning with January of each year, for 

the twelve months covered by the report required under paragraph (b) of the rule; (ii) separated, 

where applicable, between the use of central matching and electronic trade confirmation services 

offered by the clearing agency; (iii) separated, as appropriate, by asset class; (iv) separated by type 

of user; and (v) presented on an anonymized and aggregated basis. 

591  See supra Part V.C.2.e). 



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the Commission and the public, particularly the direct and indirect users of the CMSP, as to the 

progress being made each year to advance implementation of straight-through processing with 

respect to the allocation, confirmation, affirmation, and matching of institutional trades, the 

communication of messages among the parties to the transactions, and the availability of service 

offerings that reduce or eliminate the need for manual processing.   

New Rule 17Ad-27 requires the CMSP to file the report on EDGAR using Inline XBRL, a 

structured (machine-readable) data language.592  The Commission does not currently require 

CMSPs to provide the specific disclosures set forth in Rule 17Ad-27, but CMSPs may provide 

disclosures related to straight-through processing as part of Exhibit J or Exhibit S to their 

exemption applications (or updates thereto) on Form CA-1.593  These disclosures are not centrally 

filed on an electronic database, nor are they machine-readable; instead, clearing agencies are 

required to mail four completed copies of Form CA-1 to the Commission’s headquarters.594 

Requiring a centralized filing in EDGAR using location and a machine-readable data 

language for the reports facilitates access, retrieval, analysis, and comparison of the disclosed 

straight-through processing information across different CMSPs and time periods by the 

                                                 
592  See supra Part V.C.4. 

593  In the past, applicants have discussed on the Form CA-1 application how their services 

might relate to the overall objective of straight-through processing.  See, e.g., Bloomberg STP LLC 

Form CA-1 (Jan. 21, 2015), https://www.sec.gov/rules/other/2015/34-74394-form-ca-1.pdf.  

Exhibit J to Form CA-1 requires clearing agencies to provide narrative descriptions of each service 

or function performed by the registrant.  Exhibit S to Form CA-1 requires a statement 

demonstrating why the granting of an exemption from registration as a clearing agency would be 

consistent with the public interest, the protection of investors and the purposes of section 17A of 

the Act, including the prompt and accurate clearance and settlement of securities transactions and 

the safeguarding of securities and funds. 

594  See Instruction I.2. to Form CA-1. 

https://www.sec.gov/rules/other/2015/34-74394-form-ca-1.pdf


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Commission and the public, thus potentially augmenting the informational benefits of the report 

requirement.   

2. Costs 

The Commission believes that compliance with a T+1 standard settlement cycle will 

involve initial fixed costs to update systems and processes.595  The Commission does not have all 

of the data necessary to form its own firm-level estimates of the costs of updates to systems and 

processes, as the types of data needed to form these estimates are difficult or impossible for the 

Commission to collect.  However, the Commission has used inputs provided by industry studies 

discussed in this release to quantify these costs to the extent possible in Part VIII.C.5.  In the 

proposing release, the Commission encouraged commenters to provide any additional or more 

current information or data on the costs to market participants of the proposed rule.  Information 

received in public comments has informed this analysis.   

The operational cost burdens associated with the amendment to Rule 15c6-1(a) for 

different market participants may vary depending on each market participant’s degree of direct or 

indirect inter-connectivity to the clearance and settlement process, regardless of size.  For example, 

market participants that internally manage more of their own post-trade processes directly incur 

more of the upfront operational costs associated with the amendment to Rule 15c6-1(a), because 

they are required to directly undertake more of the upgrades and testing necessary for a T+1 

                                                 
595  Industry sources have suggested some updates to systems and processes might yield 

operational cost savings after the initial update.  For example, the T+1 Report stated that “[w]hile 

there may be … up-front implementation costs to transition the industry to T+1, the industry 

foresees long-term cost reduction for market participants, and by extension, costs borne by end 

investors, given the benefits of moving to T+1 settlement.”  T+1 Report, supra note 61, at 9; see 

infra Part VIII.C.5.a). for industry estimates of      the costs and benefits of the proposed amendment 

to Rule 15c6-1(a). 

 



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standard settlement cycle.  As mentioned in Part II.B of the proposing release, other market 

participants might outsource the clearance and settlement of their transactions to third-party 

providers of back-office services.  The exposures to the operational costs associated with 

shortening the standard settlement cycle should be indirect to the extent that third-party service 

providers pass through the costs of infrastructure upgrades to their customers.  The degree to 

which customers bear operational costs depends on their bargaining position relative to third-party 

providers.  Large customers with market power may be able to avoid internalizing these costs, 

while small customers in a weaker negotiation position relative to service providers may bear the 

bulk of these costs.  In either case, to the extent that the costs of infrastructure upgrades are fixed, 

the distribution of the cost burden across many customers of the third-party service provider 

implies that the costs to each individual customer is likely to be less than if they did not outsource 

the clearance and settlement of their transactions. 

Further, changes to initial and ongoing operational costs may make some self-clearing 

market participants alter their decision to continue internally managing the clearance and 

settlement of their transactions.  Entities that currently internally manage their clearance and 

settlement activity may prefer to restructure their businesses to rely instead on third-party 

providers of clearance and settlement services that may be able to amortize the initial fixed cost of 

upgrade across a much larger volume of transaction activity. 

In addition, the shortening of the settlement cycle may increase the need for some market 

participants engaging in cross-border and cross-asset transactions to hedge risks stemming from 

mismatched settlement cycles and differences in time zones, resulting in additional costs.  For 

example, as discussed in Part II.B.1 above, a comment letter submitted by an industry association 

representing the alternative investment industry stated that the T+1 Proposing Release “raises 



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considerable risks for asset managers with primary or significant exposure to markets that will 

remain at T+2.”596  The commenter’s letter references specifically “misalignment concerns” 

relating to FX settlement risk, international banking and coordination issues, and 

collateral/liquidity risk.597   

One commenter stated that because FX transactions largely settle on a T+2 basis, market 

participants that seek to fund a cross-border securities transaction with the proceeds of an FX 

transaction would be required to settle the securities transaction before the proceeds of the FX 

transaction become available and pre-fund these securities transactions, which would potentially 

adversely impact client performance and increase operating and settlement risk for advisers.598  

The commenter said that, while both domestic and internationally based investment advisers would 

be impacted by these issues, non-U.S.-based investment advisers would face additional expenses 

because they would need to set up an FX trading and settlement presence in the U.S., or add staff 

abroad to create, execute, and settle FX transactions to meet a T+1 timeline.599  Although there 

currently exists misalignment of settlement cycles across asset classes and as a result of time zone 

differences, the Commission agrees that misalignment introduced by the rule amendment being 

                                                 
596  See supra note 31. 

597  See supra note 34. 

598  IAA October Letter, supra note 222, at 4.  The commenter also suggested certain actions 

the Commission could take to reduce disruption in FX markets.  See supra note 41. 

599  IAA October Letter, supra note 222, at 4 (suggesting certain actions the Commission could 

take to reduce disruption in FX markets, such as by (i) working with other regulators and market 

participants to support the move to T+1 by, among other things, modifying the FX and equity 

trading day(s) in the U.S., and (ii) “allow[ing] for a mismatch of FX settlement dates as a valid 

reason for T+2 settlement arrangements without it breaching an investment adviser’s best 

execution obligation”). 



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adopted will likely present some challenges for, and increase costs for, certain market participants, 

including asset managers.600  For example, as discussed in the proposing release, under the T+1 

settlement cycle, a market participant selling a security in European equity markets to fund a 

purchase of securities in U.S. markets would face a one day lag between settlement in Europe and 

settlement in the U.S.  The market participant could choose between bearing an additional day of 

market risk in the U.S. trading markets by delaying the purchase by a day, or funding the purchase 

of U.S. shares with short-term borrowing.  Additionally, because the FX market has a T+2 

settlement cycle,601 the market participant will also be faced with a choice between bearing an 

additional day of currency risk due to the need to sell foreign currency as part of the transaction, or 

incurring the cost related to hedging away this risk in the forward or futures market. 

Another commenter stated that if the U.S. settlement cycle is shortened to T+1 while other 

major global financial centers remain on a T+2 settlement cycle, “there will be increased 

operational cost and significant settlement risks associated with multi-leg cross border 

transactions.”602  This commenter further stated that it expects mismatched settlement cycles 

would result in increased financing costs associated with transactions in which a U.S. market 

participant is selling to a cross-border participant because “we will be forced to receive (and pay 

                                                 
600  See Part II.C.1. (discussing challenges and costs associated with the misalignment of 

securities and FX settlement cycles). 

601  See, e.g., CME, CME Rulebook Chapter 13, at 3, 

https://www.cmegroup.com/content/dam/cmegroup/rulebook/CME/I/13.pdf (“Spot FX 

Transaction means a currency purchase and sale that is bilaterally settled by the counterparties via 

an actual delivery of the relevant currencies within two Business Days.”).  U.S. and Canadian 

dollar spot FX transactions settle on the next business day.  Id. at 5–6.  

602  See supra note 43. 

https://www.cmegroup.com/content/dam/cmegroup/rulebook/CME/I/13.pdf


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for) a securities position on T+1 for the U.S. leg, but generally be unable to onward deliver the 

position on the foreign leg until T+2.”603  This commenter also stated its expectation that 

mismatched settlement cycles will result in a significant number of settlement fails, that the 

increase in financing costs and settlement fails in connection with cross-border transactions may 

force broker-dealers to decrease or cease offering cross-border services to their clients, that any 

decrease or cessation of cross-border trading ultimately will reduce liquidity for U.S. investors.604 

Another commenter stated that the shortened settlement cycle in conjunction with time 

zone differences between markets may not allow sufficient time for investment advisers to match 

foreign currency amount to settle all trades on T+1.605  In the context of discussing potential 

exemptions to 15c6-1, another commenter stated that settling trades with different time zones is 

already a difficult process and accelerating the settlement cycle for these securities would make 

cross-border transactions even more challenging.606 

Commenters also stated that the misalignment of settlement cycles between U.S. securities 

and non-U.S. securities will impact U.S. securities that are exchangeable for a foreign security or a 

basket including foreign securities.607  The commenter highlighted in particular ADRs, and ETFs 

with an underlying basket that includes foreign securities, which according to the commenter, 

                                                 
603  Id. 

604  Id. 

605  See supra note 50.  This commenter also suggested certain “options” for actions that could 

be taken to reduce disruption in the FX markets.  See supra Part II for a discussion of these 

options. 

606  See supra note 107. 

607  See SIFMA April Letter, supra note 15, at 8. 



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illustrate this misalignment.608  The commenter stated that market makers and other market 

participants may purchase foreign shares and sell related ADRs in the U.S. on the same trading 

day, and thus timely settle the sale of the ADRs using the newly created ADRs.609  According to 

the commenter, this type of trade will not be possible if the underlying foreign shares settle on T+2 

and the related ADR is required to settle on T+1.610  The result, the commenter stated, is likely to 

be wider bid-ask spreads for the ADR because market makers must take into account the additional 

cost of borrowing securities and other financing costs to avoid settlement failures.611  Additionally, 

the commenter argued, the incidence of fails would likely increase as a result of the misaligned 

settlement cycles, particularly where it is not possible to borrow securities to make delivery, and a 

knock-on effect could be to increase the incidence of buy-ins as well.612   

Separately, the same commenter argued that the ETF creation/redemption process is 

impacted by the misalignment of global securities transaction settlement cycles where the basket of 

securities underlying an ETF includes foreign securities.613  A second commenter stated that the 

misalignment in settlement cycles between the U.S. and foreign jurisdictions that continue to settle 

on a T+2 basis, coupled with time zone differences, may increase certain risks, such as failed 

                                                 
608  See id. 

609  See SIFMA April Letter, supra note 16, at 8. 

610  See id. 

611  See id. 

612  See id. 

613  See id. and referencing text for a discussion of settlement cycle misalignment on the create 

and redeem process for ETFs that include securities not traded in the U.S. 



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trades, accrual differences, net asset value miscalculations, and investment guideline breaches.614  

The same commenter stated that due to the resulting misalignment in settlement cycles between 

the U.S. and foreign markets upon transitioning to T+1, an ADR provider may incur borrowing 

and other costs related to the underlying foreign security to facilitate T+1 settlement of the 

ADR.615  According to the commenter, these costs would likely be passed down to investors and 

thus make it more expensive to obtain investment exposure to foreign markets.616 

The Commission understands that variation in the length of the settlement cycle across 

asset classes and jurisdictions and variation in time zone introduce certain risks and costs on 

investors, broker-dealers, custodians, and other market participants,617 but the Commission notes 

that currently and in the recent past settlement cycles have varied across asset classes and 

jurisdictions.  The Commission further understands that the financial services industry has 

managed the challenges provided by these settlement cycle mismatches and time zone differences 

between markets albeit at some cost.618   Our information on these costs is limited regarding how 

firms will overcome the specific challenges identified by certain commenters.  If other 

                                                 
614  See supra note 122. 

615  See id. 

616  See id. 

617  See supra Part II.C.1. for a discussion of the Commission’s recognition of the challenges 

and costs associated with the prospective misalignment of settlement cycles, the Commission 

actions suggested by commenters, and examples of actions market participants may take in order 

to mitigate those challenges and costs. 

618  For example, during periods of heightened uncertainty it is common for some investors to 

sell equities, including foreign equities, and invest in U.S. Treasury securities (which generally 

settle on T+1).  Such a trade would include many of the issues cited by commenters including 

differences in time zones, currency, and settlement cycle. 



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jurisdictions subsequently follow the U.S. in shortening the settlement cycle, however, many of the 

additional costs will only be incurred during that interval.619  In addition, the Commission 

understands that solutions to specific challenges may still need to be worked out by the affected 

industry participants and that those solutions may require additional costs to overcome.   

The way that different market participants will likely bear costs as a result of the 

amendment to Rule 15c6-1(a) may also vary based on their business structure.  For example, a 

shorter standard settlement cycle will require payment for securities that settle regular-way by T+1 

rather than T+2.  Generally, regardless of current funding arrangements between investors and 

broker-dealers, removing one business day between execution and settlement will mean that 

broker-dealers could choose between requiring investors to fund the purchase of securities one 

business day earlier, while extending the same level of credit they do under T+2 settlement, or 

providing an additional business day of funding to investors.620  In other words, broker-dealers 

could pass through some of the costs of a shorter standard settlement cycle by imposing the same 

shorter cycle on investors, or they could pass these costs on to investors by raising transactions 

fees to compensate for the additional business day of funding the broker-dealer may choose to 

provide.  The extent to which these costs get passed through to customers may depend on, among 

other things, the market power of the broker-dealer.  Generally, if a broker-dealer does not face 

significant competition, it will have an incentive to absorb part of the cost increase.  On the other 

                                                 
619  See supra Part VIII.C.1. 

620  The direct cost of such a delay would be the one-day borrowing cost of the market 

intermediary providing the extra day of financing or the opportunity cost of funds to the investor 

times the value of the transaction.  Such funding and opportunity costs will vary across investors, 

intermediaries, and time.  



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hand, in the extreme case of a perfectly competitive market, there are no economic profits and 

price equals marginal costs so an increase in cost could be fully passed through to the customer.621     

However, broker-dealers that predominantly serve retail investors may experience the costs 

of an earlier payment requirement differently from broker-dealers with more institutional clients or 

large custodian banks because of the way retail investors fund their accounts.  Retail investors may 

find it difficult to accelerate payments associated with their transactions, which may cause broker-

dealers, who are unwilling to extend additional credit to retail investors, to instead require that 

these investors pre-fund their transactions.622  These broker-dealers may also experience costs 

unrelated to funding choices.  For instance, retail investors may require additional or different 

services such as education regarding the impact of the shorter standard settlement cycle. 

Finally, a shorter settlement cycle may result in higher costs associated with liquidating a 

defaulting member’s position, as a shorter horizon may result in larger price impacts, particularly 

for less liquid assets.  For example, when a clearing member defaults, NSCC is obligated to fulfill 

its trade guarantee with the defaulting member’s counterparty.  One way it accomplishes this is by 

liquidating assets from clearing fund contributions from clearing members.  However, liquidating 

assets in shorter periods of time can have larger adverse impacts on the prices of the assets.  

                                                 
621  More specifically, the market clearing quantity of the good or service supplied will adjust 

and the extent of industry-wide cost pass-through in a perfectly competitive market depends on the 

elasticity of demand relative to supply.  The more elastic is demand, and the less elastic is supply, 

the smaller the extent of pass-through, all else being equal.  See RBB Economics, COST PASS-

THROUGH: THEORY, MEASUREMENT AND POTENTIAL POLICY IMPLICATIONS, A REPORT PREPARED 

FOR THE OFFICE OF FAIR TRADING, at 4 (Feb. 2014) 

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/

320912/Cost_Pass-Through_Report.pdf. 

622  See infra Part VIII.C.5.b)(3) for additional discussion regarding retail investors and their 

broker-dealers. 



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Shortening the standard settlement cycle from two business days to one business day could reduce 

the amount of time that NSCC has to liquidate its assets, which may exacerbate the price impact of 

liquidation. 

As discussed above, the Commission is amending the recordkeeping obligations of 

investment advisers with respect to any securities transaction that is subject to the requirements of 

Rule 15c6-2(a) to require advisers to make and keep records of their related allocations and 

affirmations sent or received, as well as the confirmations they receive.623  The amendment to Rule 

204-2 requires advisers to time and date stamp records of any such allocation and affirmation.  The 

Commission recognizes, however, that requiring these records, and adding time and date stamps to 

records, will add additional costs and burdens for those advisers that do not currently make and 

keep these records, or do not use electronic systems to send allocations and affirmations to brokers 

or dealers, or retain confirmations.624  For example, some advisers may incur costs to update their 

processes to accommodate these records. 

3. Economic Implications through Other Commission Rules 

As noted in Part III.E of the T+1 proposing release, the amendment to Rule 15c6-1(a), by 

shortening the standard settlement cycle, could have an ancillary impact on the means by which 

market participants comply with existing regulatory obligations that relate to the settlement 

timeframe.  The Commission also provided illustrative examples of specific Commission rules that 

                                                 
623  See supra Part IV.C. 

624  A commenter sought clarification regarding an adviser’s ability to rely on third parties to 

meet its recordkeeping obligations for allocations, confirmations, and affirmations. See supra note 

304 and accompanying text.  As discussed above in Part IV.C., the Commission is confirming that 

an adviser may rely on a third party to make and keep the required records, although using a third 

party to make and keep records does not reduce an adviser’s obligations under Rule 204-2. 



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include such requirements or are otherwise reference the settlement date, including Regulation 

SHO,625 and certain provisions included in the Commission’s financial responsibility rules.626  The 

Commission invited and received public comment on these effects, and these comments are 

discussed in detail in Part VI.  Those public comments inform this analysis, but did not provide 

information the Commission could use to quantify the ancillary economic impact the amendments 

and new rules might have on how market participants comply with other Commission rules.   

Financial markets and regulatory requirements have evolved significantly since the 

Commission adopted Rule 15c6-1 in 1993.  Market participants have responded to these 

developments in diverse ways, including implementing a variety of systems and processes, some 

of which may be unique to specific market participants and their businesses, and some of which 

may be integrated throughout business operations of certain market participants.  Because of the 

broad variety of ways in which, depending on their particular circumstances, market participants 

currently satisfy regulatory obligations pursuant to Commission rules, it is difficult to identify 

particular practices that may be specific to a single or group of market participants will need to 

change in order to meet these other obligations.  In this case, the Commission is unable to quantify 

the ancillary economic impact that the amendment to Rule 15c6-1(a) will have on how market 

participants comply with other Commission rules.  As above, the Commission invited commenters 

to provide quantitative and qualitative information about these potential economic effects.  These 

comments are discussed in in detail in Part VI above and inform this analysis.   

                                                 
625  17 CFR 242.200 through 242.204. 

626  See T+1 Proposing Release, supra note 2, at 10462–63; see also supra Parts VI.A. and VI.C. 

(discussing comments received). The Commission also solicited comment on the impact of 

shortening the settlement cycle on compliance with Rule 10b-10 under the Exchange Act and 

broker-dealer obligations with regard to prospectus delivery.  See T+1 Proposing Release, supra 

note 2, at 10463–64; see also supra Parts VI.B. and VI.C. (discussing comments received). 



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In certain cases, based on information about current market practices, the Commission 

believes that the amendment to Rule 15c6-1(a) will be unlikely to change the means by which 

market participants comply with existing regulatory requirements.  In these cases, the Commission 

believes that market participants will not incur significant increased costs of compliance from such 

regulatory requirements from shortening the settlement cycle to T+1. 

In other cases, however, the amendment may incrementally increase the costs associated 

with complying with other Commission rules, where such rules potentially require broker-dealers 

to engage in purchases of securities.  Two examples of these types of rules are Regulation SHO 

and the Commission’s financial responsibility rules.  In most instances, Regulation SHO governs 

the timeframe in which a “participant” of a registered clearing agency must close out a fail to 

deliver position by purchasing or borrowing securities.627  Similarly, some of the Commission’s 

financial responsibility rules relate to actions or notifications that reference the settlement date of a 

transaction.  For example, Exchange Act Rule 15c3-3(m)628 uses the settlement date to prescribe 

the timeframe in which a broker-dealer must complete certain sell orders on behalf of customers.  

As noted above, the term “settlement date” is also incorporated into paragraph (c)(9) of Rule 15c3-

1,629 which explains what it means to “promptly transmit” funds and “promptly deliver” securities 

within the meaning of paragraphs (a)(2)(i) and (a)(2)(v) of Rule 15c3-1.  As explained above, the 

concepts of promptly transmitting funds and promptly delivering securities are incorporated in 

                                                 
627  See T+1 Proposing Release, supra note 2, at 10461–62.    

628  17 CFR 240.15c3-3(m). 

629  17 CFR 240.15c3-1(c)(9). 



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other provisions of the financial responsibility rules.630  Under the amendment to Rule 15c6-1(a), 

the timeframes included in these rules will be one business day closer to the trade date. 

The Commission believes that shortening these timeframes should not materially affect the 

costs that broker-dealers incur to meet their Regulation SHO obligations and obligations under the 

Commission’s financial responsibility rules.631  Nevertheless, the Commission acknowledges that a 

shorter settlement cycle could affect the processes by which broker-dealers manage the likelihood 

of incurring these obligations.  For example, broker-dealers may currently have in place inventory 

management systems that help them avoid failing to deliver securities by T+2.  Broker-dealers will 

likely incur costs in order to update these systems to support a shorter settlement cycle. 

In cases where market participants will need to adjust the way in which they comply with 

other Commission rules, the magnitude of the costs associated with these adjustments is difficult to 

quantify.  As noted above, market participants employ a wide variety of strategies to meet 

regulatory obligations.  For example, broker-dealers may ensure that they have securities available 

to meet their obligations by using inventory management systems, or they may choose instead to 

borrow securities.  An estimate of costs is further complicated by the possibility that market 

participants could change their compliance strategies in response to a shorter standard settlement 

cycle. 

As with the T+2 transition, the Commission anticipates that the transition to T+1 will again 

require changes to SRO rules and changes to the operations or market participants subject to those 

                                                 
630  See, e.g., 17 CFR 240.15c3-1(a)(2)(i) and (v); 17 CFR 240.15c3-3(k)(1)(iii) and (k)(2)(i) 

and (ii); 17 CFR 240.17a-5(e)(1)(i)(A); 17 CFR 240.17a-13(a)(3). 

631  See supra Parts VI.A. (Regulation SHO) and VI.C. (Financial Responsibility Rules for 

Broker-Dealers) for a discussion of commenters concerns and the reasons why the Commission 

believes that costs should not be materially affected. 



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rules to achieve consistency with a T+1 standard settlement cycle.  Certain SRO rules reference 

existing Rule 15c6-1 or currently define “regular way” settlement as occurring on T+2 and, as 

such, may need to be amended in connection with shortening the standard settlement cycle to T+1.  

Certain timeframes or deadlines in SRO rules also may refer to the settlement date, either 

expressly or indirectly.  In such cases, the SROs may need to amend these rules in connection with 

shortening the settlement cycle to T+1.632 

The Commission invited commenters to provide quantitative and qualitative information 

about the impact of the amendment to Rule 15c6-1(a) on the costs associated with compliance with 

other Commission rules.  Although several commenters raised issues related to SRO rules and 

operations,633 no commenters provided quantitative information about the impact of the rules and 

rule amendments being adopted on the costs associated with compliance with other Commission 

rules or SRO rules. 

4. Effect on Efficiency, Competition, and Capital Formation 

In response to the T+1 Proposing Release, the Commission received numerous comment 

letters supporting a shorter settlement cycle for securities transactions citing positive effects of the 

proposed rule on efficiency, competition, and capital formation.  One commenter stated that the 

Commission’s proposal to shorten the settlement cycle is an example of an initiative aimed at 

introducing more efficiency to the marketplace while reducing risks for investors and other market 

                                                 
632  The T+1 Report similarly indicates that SROs will likely need to update their rules to 

facilitate a transition to a T+1 standard settlement cycle.  T+1 Report, supra note 61, at 35. 

633  See supra Part VI.E. 



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participants.634  Another commenter noted that shortening the current settlement cycle would 

improve capital and operational efficiencies.635  Another commenter cited benefits of the proposed 

rule including enhanced efficiency of the equity markets and better use of capital.636  Another 

commenters stated that the proposed rule may improve capital efficiency and may increase 

competition.637  A commenter also noted that the “reasonably designed” standard for policies and 

procedures fosters innovation and encourages competition by enabling each registrant to adopt 

compliance methodologies aligned to its role and capabilities.638  While discussing changes 

necessary to implement a shorter settlement cycle, a commenter noted that the settlement process 

would be modernized to remove dependencies on manual processes and facilitate straight-through 

processing utilizing technology to achieve a more robust process which would reduce risks and 

remove impediments to an efficient settlement process.639 

Market participants may incur initial costs for the investments necessary to comply with a 

                                                 
634  See Virtu Financial Letter, supra note 16, at 5. 

635  See Cornell Law Letter, supra note 16, at 3; see also RMA Letter, supra note 16, at 3, 

stating that “We further agree that acceleration of the standard settlement cycle to T+1 could 

increase the efficiency of capital market transactions and reduce systemic risk.” See also NYSE 

Group Letter, supra note 16, at 1, stating that “A T+1 settlement cycle will significantly increase 

market efficiency, mitigate risk (particularly during times of extreme volatility and stressed 

markets) and free up liquidity - cash or shares - held to ensure the completion of trades. This will 

allow industry participants to take advantage of capital and operational efficiencies, and benefit 

from significant risk reduction and a potential lowering of margin requirements.” 

636  See MMI Letter, supra note 16, at 2. 

637  See Wilson-Davis Letter, supra note 16, at 5-6. 

638  See OCC Letter, supra note 16, at 3. 

639  See Jeffrey S. Davis, Senior Vice President, Senior Deputy General Counsel, Nasdaq (April 

11, 2022) (“Nasdaq Letter”), at 2. 



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shorter standard settlement cycle.640  However, these costs are likely to differ across market 

participants, and these differences may exacerbate coordination problems.  First, per-transaction 

operational costs clearing members incur in connection with the clearing services they provide 

may be higher for members that clear fewer transactions than such costs are for members that clear 

a higher volume of transactions.  Thus, the extent to which many of the upgrades necessary for a 

T+1 standard settlement cycle are optimal for a member to adopt unilaterally may depend, in part, 

on the transaction volume cleared by such member.  For example, certain upgrades necessary for a 

T+1 standard settlement cycle may result in economies of scale, where large clearing members are 

able to comply with the amendment to Rule 15c6-1(a) at a lower per-transaction cost than smaller 

members.  As a result, larger members might take a short time to recover their initial costs for 

upgrades; smaller members with lower transaction volumes might take longer to recover their 

initial cost outlays and might be more reluctant to make the upgrades in the absence of the 

amendment.  These differences in cost per transaction may be mitigated through the use of third-

party service providers. 

In addition, the Commission acknowledges that the upgrades necessary to implement a 

shorter standard settlement cycle may produce indirect economic effects.  We analyze some of 

these indirect effects, such as the impact on competition and third-party service providers, in the 

following section.   

A shorter settlement cycle might improve the efficiency of the clearance and settlement 

process through several channels.  First, the Commission believes that the primary effect that a 

shorter settlement cycle will have on the efficiency of the settlement process will be a reduction in 

                                                 
640  See supra Part VIII.C.2. 



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the credit, market, and liquidity risks that broker-dealers, CCPs, and other market participants are 

subject to during the standard settlement cycle.641  A shorter standard settlement cycle will 

generally reduce the volume of unsettled transactions that could potentially pose settlement risk to 

counterparties.  Shortening the period between trade execution and settlement should enable trades 

to be settled with less aggregate risk to counterparties or the CCP.  A shorter standard settlement 

cycle may also decrease liquidity risk by enabling market participants to access the proceeds of 

their transactions sooner, which may reduce the cost market participants incur to handle 

idiosyncratic liquidity shocks (i.e., liquidity shocks that are uncorrelated with the market).  That is, 

because the time interval between a purchase/sale of securities and payment is reduced by one 

business day, market participants with immediate payment obligations that they could cover by 

selling securities will be required to obtain short-term funding for one less day.642  As a result of 

reduced cost associated with covering their liquidity needs, market participants may, under 

particular circumstances, be able to shift assets that would otherwise be held as liquid collateral 

towards more productive uses, improving allocative efficiency.643   

Second, a shorter standard settlement cycle may increase price efficiency through its effect 

on credit risk exposures between financial intermediaries and their customers.  In particular, a prior 

study noted that certain intermediaries that transact on behalf of investors, such as broker-dealers, 

may be exposed to the risk that their customers default on payment obligations when the price of 

                                                 
641  Reduction of these risks should result in the reduction of margin requirements and other 

risk management activity that requires resources that could be put to another use. 

642  See supra Part VIII.B.2. 

643  See supra Part VIII.A. 



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purchased securities declines during the settlement cycle.644  As a result of the option to default on 

payment obligations, customers’ payoffs from securities purchases resemble European call options 

and, from a theoretical standpoint, can be valued as such.  Notably, the value of European call 

options increases in the time to expiration645 suggesting that the value of call options held by 

customers who purchase securities is increasing in the length of the settlement cycle.  In order to 

compensate itself for the call option that it writes, an intermediary may include the cost of these 

call options as part of its transaction fee and this cost may become a component of bid-ask spreads 

for securities transactions.  By reducing the value of customers’ option to default by reducing the 

option’s time to maturity, a shorter standard settlement cycle may reduce transaction costs in U.S. 

securities markets.  In addition, to the extent that any benefit buyers receive from deferring 

payment during the settlement cycle is incorporated in securities returns,646 the amendment to Rule 

15c6-1(a) may reduce the extent to which such returns deviate from returns consistent with 

changes in fundamentals. 

As discussed in more detail in Part VIII.C.2 above, the Commission believes that the 

amendment to Rule 15c6-1(a) will likely require market participants to incur costs related to 

infrastructure upgrades, and will likely yield benefits to market participants, largely in the form of 

reduced operational and financial risks related to settlement.  As a result, the Commission believes 

that the amendment to Rule 15c6-1(a) could affect competition in a number of different, and 

                                                 
644  See Madhavan et al., supra note 508. 

645  All other things equal, an option with a longer time to maturity is more likely to be in the 

money given that the variance of the underlying security’s price at the exercise date is higher. 

646  See supra Part VIII.B.2.Conformed to Federal Register version 

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potentially offsetting, ways. 

The prospective reduction in financial risks related to shortening the standard settlement 

cycle may represent a reduction in barriers to entry for certain market participants.647  Reductions 

in the financial resources required to cover an NSCC member’s clearing fund requirements that 

result from a shorter standard settlement cycle could encourage financial firms that currently clear 

transactions through NSCC clearing members to become clearing members themselves. 

Their entry into the market could promote competition among NSCC clearing members.  

Furthermore, if a reduction in settlement risks results in lower transaction costs for the reasons 

discussed above, market participants that were, on the margin, discouraged from supplying 

liquidity to securities markets due to these costs, could choose to enter the market for liquidity 

suppliers, increasing competition. 

At the same time, the Commission acknowledges that the process improvements required 

to enable a shorter standard settlement cycle could adversely affect competition.  Among clearing 

members, where such process improvements might be necessary to comply with the shorter 

standard settlement cycle required under the amendment to Rule 15c6-1(a), the cost associated 

with compliance might increase barriers to entry, because new firms will incur higher fixed costs 

associated with a shorter standard settlement cycle if they wish to enter the market.  Clearing 

members might choose to comply by upgrading their systems and processes or may choose instead 

to exit the market for clearing services.  The exit of clearing members could have negative 

consequences for competition among clearing members.  Clearing activity tends to be concentrated 

                                                 
647  See supra Part VIII.C.1. for a discussion of the reduction in credit, market, and liquidity 

risks to which NSCC would be subject as a result of a shortening of the settlement cycle and the 

subsequent reduction financial resources dedicated to mitigating those risks. 



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among larger broker-dealers.648  Clearing member exit could result in further concentration and 

additional market power for those clearing members that remain. 

Alternatively, some current clearing members may choose to comply in part by outsourcing 

their operational needs to third-party service providers.  Use of third-party service providers may 

represent a reasonable response to the operational costs associated with the amendment to Rule 

15c6-1(a).  To the extent that third-party service providers are able to spread the fixed costs of 

compliance across a larger volume of transactions than their clients, the Commission believes that 

the use of third-party service providers might impose a smaller compliance cost on clearing 

members than if these firms directly bore the costs of compliance.  The Commission believes that 

this impact may stretch beyond just clearing members.  The use of third-party service providers 

may mitigate the extent to which the amendment to Rule 15c6-1(a) raises barriers to entry for 

broker-dealers.  Because these barriers to entry may have adverse effects on competition between 

clearing members, the Commission believes that the use of third-party service providers may 

mitigate the adverse effects of the amendment to Rule 15c6-1(a) on competition between broker-

dealers. 

Existing market power may also affect the distribution of competitive impacts stemming 

from the amendment to Rule 15c6-1(a) across different types of market participants.  While, as 

noted above, reductions in the credit, market, and liquidity risks that broker-dealers, CCPs, and 

other market participants are subject to during the standard settlement cycle could promote 

competition among clearing members and liquidity suppliers, these groups may benefit to differing 

degrees, depending on the extent to which they are able to capture the benefits of a shortened 

standard settlement cycle. 

                                                 
648  See supra Part VIII.B.2. 



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Finally, a shorter standard settlement cycle might also improve the capital efficiency of the 

clearance and settlement process, which will promote capital formation in U.S. securities markets 

and in the financial system generally.649  A shorter standard settlement cycle will reduce the 

amount of time that collateral must be held for a given trade, thus freeing the collateral to be used 

elsewhere earlier.  For a given quantity of trading activity, collateral will also be committed to 

clearing fund deposits for a shorter period of time.  The greater collateral efficiency promoted by a 

shorter settlement cycle might also indirectly promote capital formation for market participants in 

the financial system in general.  Specifically, the improved capital efficiency that results from a 

shorter standard settlement cycle will enable a given amount of collateral to support a larger 

amount of financial activity. 

5. Quantification of Direct and Indirect Effects of a T+1 Settlement Cycle 

In previous years, several industry groups have released estimates for compliance costs 

associated with a shorter standard settlement cycle, including the SIA, the “Industry Steering 

Committee (“ISC”), and BCG.650  Although all of these studies examined prior shortenings of the 

settlement cycle including from T+5 to T+3 and from T+3 to T+2, in the absence of a current 

study examining shortening from the current T+2 to T+1, they serve as a useful rough initial 

estimate of the costs involved in a settlement cycle shortening.  The most recent of these, the BCG 

Study, performed a cost-benefit analysis of a T+2 standard settlement cycle.  Below is a summary 

                                                 
649  See supra Part VIII.A. for more discussion regarding capital formation and efficiency. 

650  See SIA Business Case Report, supra note 323; see also BCG Study, supra note 565; 

PRICEWATERHOUSECOOPERS LLP & ISG, SHORTENING THE SETTLEMENT CYCLE: THE MOVE TO 

T+2 (June 2015) (“ISG White Paper”), http://www.ust2.com/pdfs/ssc.pdf.  This release uses “ISG” 

rather than “ISC” (“Industry Steering Committee,” the term used in the ISG White Paper) when 

referring to the T+2 effort so that this release clearly distinguishes between the ISC’s current work 

on T+1.  The SIA has since merged with other groups to form SIFMA. 

http://www.ust2.com/pdfs/ssc.pdf


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of the cost estimates in the BCG Study, and in the following subsections, an evaluation of these 

estimates as part of the discussion of the potential direct and indirect compliance costs related to 

the amendment to Rule 15c6-1(a).  In addition, the Commission encouraged commenters to 

provide additional information to help quantify the economic effects that we are currently unable 

to quantify due to data limitations. 

a) Industry Estimates of Costs and Benefits 

The BCG Study concluded that the transition to a T+2 settlement cycle would cost 

approximately $550 million in incremental initial investments across industry constituent 

groups,651 which would result in annual operating savings of $170 million and $25 million in 

annual return on reinvested capital from clearing fund reductions.652   

The BCG Study also estimated that the average level of required investments per firm 

could range from $1 to 5 million, with large institutional broker-dealers incurring the largest 

amount of investments on a per-firm basis, and buy side firms at the lower end of the spectrum.653  

The investment costs for “other” entities, including DTCC, DTCC ITP Matching (US) LLC (f/k/a 

Omgeo Matching (US) LLC), service bureaus, registered investment companies (“RICs”), and 

non-self-clearing broker-dealers totaled $70 million for the entire group.  Within this $70 million, 

DTCC and Omgeo were estimated to have a compliance investment cost of $10 million each.  The 

                                                 
651  The BCG Study generally refers to “institutional broker-dealers,” “retail broker-dealers,” 

“buy side” firms, and “custodian banks,” without defining these particular groups.  The 

Commission uses these terms when referring to estimates provided by the BCG Study but notes 

that its own definitions of various affected parties may differ from those in the BCG Study. 

652  See BCG Study, supra note 565, at 9–10. 

653  Id. at 30–31. 



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study’s authors estimated that institutional broker-dealers would have operational cost savings of 

approximately 5%, retail broker-dealers of 2% to 4%, buy-side firms of 2%, and custodial banks of 

10% to 15% for an industry total operational cost savings of approximately $170MM per year.654   

The BCG Study also estimated the annual clearing fund reductions resulting from 

reductions in clearing firms’ clearing funds requirements to be $25 million per year.655  The study 

estimated this by multiplying the reduction in clearing fund requirements and the average Federal 

Funds target rate for the 10-year period up until 2008 (3.5%).  The BCG Study also estimated the 

value of the risk reduction in buy side exposure to the sell side.  The implied savings were 

estimated to be $200 million per year, but these values were not included in the overall cost-benefit 

calculations. 

Several factors limit the usefulness of the BCG Study’s estimates of potential costs and 

benefits of the amendment to Rule 15c6-1(a).  First, a further shortening of the settlement cycle to 

T+1 may require investments in new technology and processes that were not necessary under the 

previous shortening to T+2.  Second, technological improvements since 2012 when the report was 

first published, such as the increased use of computers and automation in post-trade processes, 

may have reduced the cost of the upgrades necessary to comply with a shorter settlement cycle.  

This may, in turn, reduce the costs associated with the amendment,656 as a larger portion of market 

participants may have already adopted many processes that would reduce the cost of a transition to 

                                                 
654  Id. at 41. 

655  See supra note 565 for a discussion of the impact on this estimate of increases in daily 

trading volume since the time of the BCG study. 

656  See supra Part VIII.A.  While market participants may have already made investments 

consistent with implementing a shorter settlement cycle, the fact that these investments have not 

resulted in a shorter settlement cycle is consistent with the existence of coordination problems 

among market participants. 



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a shorter settlement cycle.  In addition, the BCG Study considered as a part of its cost estimates 

operational cost savings as a result of improvements to operational efficiency.   

Lastly, the BCG Study was premised on survey responses by a subset of market 

participants that may be affected by the rule.  Surveys were sent to 270 market participants and 70 

responses were received, including 20 institutional broker-dealers, prime brokers, and 

correspondent clearers; 12 retail broker-dealers; 17 buy side firms; 14 registered investment 

advisers; and seven custodian banks.  Given the low response rate, as well as the uncertainty 

regarding the sample of market participants that was asked to complete the survey, the 

Commission cannot conclude that the cost estimates in the BCG Study are representative of the 

costs of all market participants.657   

b) Estimates of Costs  

The amendment to Rule 15c6-1(a) will generate direct and indirect costs for market 

participants, who may need to modify and/or replace multiple systems and processes to comply 

with a T+1 standard settlement cycle.  The T+1 Playbook included a timeline with milestones and 

dependencies necessary for a transition to a T+1 standard settlement cycle, as well as activities that 

market participants should consider in preparation for the transition, and the Commission believes 

that this provides an initial guide to the activities that will be necessary for a transition to a T+1 

standard settlement cycle.658  The Commission estimates that many of the activities for migration 

to a T+1 standard settlement cycle will stem from behavior modification of market participants and 

                                                 
657  See BCG Study, supra note 565, at 15. 

658  See T+1 Playbook, supra note 134. 



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systems testing.659  These modifications will include a compression of the settlement timeline, as 

well as an increase in the fees that brokers may impose on their customers for trade failures.  

Although the T+1 Playbook does not include any direct estimates of the compliance costs for a 

T+1 standard settlement cycle, the Commission utilizes the timeline in the T+1 Playbook for 

specific actions necessary to migrate to a T+1 settlement cycle to directly estimate the inputs 

needed for migration, and form preliminary compliance cost estimates for the shortening to T+1 

standard settlement cycle. 

In addition, the T+1 Playbook, the ISG White Paper, and the BCG Study identified several 

categories of actions that market participants might need to take to comply with a T+2 settlement 

cycle and likely also with a T+1 settlement cycle – processing, asset servicing, and 

documentation.660  While the following cost estimates for these remedial activities span industry-

wide requirements for a migration to a T+1 settlement cycle, the Commission does not anticipate 

each market participant directly undertaking all of these activities for several reasons.  First, some 

market participants work with third-party service providers to facilitate certain functions that may 

be impacted by a shorter standard settlement cycle, such as trade processing and asset servicing, 

and thus may only bear the costs of the requirements through updates to systems and processes that 

interface with and fees paid to those service providers.  Second, certain costs might only fall on 

specific categories of entities.  For example, the costs of updating the Continuous Net Settlement 

(“CNS”) and ID Net systems should only directly fall on NSCC, DTC, and members/participants 

of those clearing agencies.  Finally, some market participants may already have the processes and 

                                                 
659  See id. at 67–68 (discussing customer and staff education); see also id. at 103–107 

(discussing testing and migration).  

660  See id. at 14.  



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systems in place to accommodate a T+1 standard settlement cycle or will be able to adjust to a T+1 

settlement cycle without incurring significant costs.  For example, some market participants may 

already have the systems and processes in place to meet the requirements for same-day trade 

affirmation and matching consistent with the requirements in new Rule 15c6-2.661  These market 

participants may thus bear a significantly lower cost to update their trade affirmation 

systems/processes to settle on a T+1 standard settlement cycle.662   

The following section examines several categories of market participants and includes 

estimates the compliance costs for each category.  The Commission’s estimate of the number and 

type of personnel that may be required is based on the scope of activities for a given category of 

market participant necessary for the market participant to migrate to a T+1 settlement cycle, the 

market participant’s role within the clearance and settlement process, and the amount of testing 

required to minimize undue disruptions.663  Hourly salaries for personnel are from SIFMA’s 

Management and Professional Earnings in the Securities Industry 2013.664  These estimates use the 

timeline from the T+1 Playbook to determine the length of time personnel will work on the 

                                                 
661  See BCG Study, supra note 565, at 23. 

662  The BCG Study, as it is based on survey responses from market participants, does reflect 

the heterogeneity of compliance costs for market participants.  

663  For example, FMUs that play a critical role in the clearance and settlement infrastructure 

would require more testing associated with a T+1 standard settlement cycle than institutional 

investors. 

664  To monetize the internal costs, the Commission staff used data from SIFMA publications, 

modified by Commission staff to account for an 1800 hour work-year, and multiplied by 5.35 

(professionals) or 2.93 (office) to account for bonuses, firm size, employee benefits and overhead.  

See SIFMA, Management and Professional Earnings in the Security Industry – 2013 (Oct. 7, 

2013); SIFMA, Office Salaries in the Securities Industry – 2013 (Oct. 7, 2013).  These figures 

have been adjusted for inflation using the Bureau of Labor Statistics’ Consumer Price Index 

inflation calculator, https://www.bls.gov/data/inflation_calculator.htm. 

https://www.bls.gov/data/inflation_calculator.htm


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activities necessary to support a T+1 settlement cycle.  The timeline provides an indirect method to 

estimate the inputs necessary to migrate to a T+1 settlement cycle, rather than relying directly on 

survey response estimates.  The Commission acknowledges many entities are already undertaking 

activities to support a migration to a T+1 settlement cycle in anticipation of the amendment.  

However, to the extent that the costs of these activities have already been incurred, the 

Commission considers these costs sunk, and they are not included in the analysis below. 

(1) FMUs – CCPs and CSDs 

CNS, NSCC/DTC’s ID Net service, and other systems will require adjustment to support a 

T+1 standard settlement cycle.  The T+1 Playbook includes an estimate that regulation-dependent 

planning, implementation, testing, and migration activities associated with the transition to a T+1 

settlement cycle could last up to six quarters.665  The Commission estimates that these activities 

will impose a one-time compliance cost of $16.1 million666 for DTC and NSCC each.  After this 

initial compliance cost, the Commission expects that both DTC and NSCC will incur minimal 

ongoing costs from the transition to a T+1 standard settlement cycle, because the Commission 

estimates that the majority of costs will stem from pre-migration activities, such as 

implementation, updates to systems and processes, and testing. 

                                                 
665  See T+1 Playbook, supra note 134, at 14.  The T+1 Playbook assumes an implementation 

date during the third quarter of 2024.  We assume that the necessary tasks and the total time 

required to complete them would be similar for an earlier implementation date.  

666  The estimate is based on the T+1 Playbook timeline, which estimates regulation- dependent 

implementation activity, industry testing, and migration lasting six quarters.  The Commission 

assumes 10 operations specialists (at $159 per hour), 10 programmers (at $316 per hour), and 1 

senior operations manager (at $426/hour), working 40 hours per week.  (10 × $159 + 10 × $316 + 1 

× $426) × 6 × 13 × 40 = $16,149,120. 



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(2) Matching/ETC Providers – Exempt Clearing Agencies 

Matching/ETC Providers may need to adapt their trade processing systems to comply with 

a T+1 standard settlement cycle.  This may include actions such as updating reference data, 

configuring trade match systems, and configuring trade affirmation systems to affirm trades on 

T+0.  Matching/ETC Providers will also need to conduct testing and assess post-migration 

activities.  The Commission estimates that these activities will impose a one-time compliance cost 

of up to $16.1 million667 for each Matching/ ETC Provider.  However, the Commission 

acknowledges that some ETC providers may have a higher cost burden than others based on the 

volume of transactions that they process.  The Commission expects that ETC providers will incur 

minimal ongoing costs after the initial transition to a T+1 standard settlement cycle because the 

Commission estimates that the majority of the costs of migration to a T+1 settlement cycle entail 

behavioral changes of market participants and pre-migration testing. 

New Rule 17Ad-27 requires a CMSP to establish, implement, maintain, and enforce 

reasonably designed, written policies and procedures.  Based on the similar policies and 

procedures requirements, and the corresponding burden estimates previously made by the 

                                                 
667  The estimate is based on the T+1 Playbook timeline, which estimates regulation- dependent 

implementation activity for trade systems, matching, affirmation, testing, and post- migration 

testing lasting six quarters.  The Commission assumes 10 operations specialists (at $159 per hour), 

10 programmers (at $316 per hour), and 1 senior operations manager (at $426/hour), working 40      

hours per week.  (10 × $159 + 10 × $316 + 1 × $426) × 6 × 13 × 40 = $16,149,120. 



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Commission for Rule 17Ad-22(d)(8) and (e)(2),668 the Commission estimates that respondent 

CMSPs will incur an aggregate one-time cost of approximately $27,600.669 

The rule also imposes ongoing burdens on a respondent CMSP as follows: (i) ongoing 

monitoring and compliance activities with respect to the written policies and procedures required 

by the proposed rule; and (ii) ongoing documentation activities with respect to the required annual 

report.  As discussed in Part V.C.2, the Commission has modified the final rule to identify specific 

data elements to be included in the annual report.  Based on the similar reporting requirements, and 

the corresponding burden estimates previously made by the Commission for Rule 17Ad-

22(e)(23),670 the Commission estimates that the ongoing activities required by new Rule 17Ad-27 

will impose an aggregate annual cost of this ongoing burden of approximately $71,400.671 

                                                 
668  See Clearing Agency Standards, Exchange Act Release No. 68080 (Oct. 22, 2012), 77 FR 

66219, 66260 (Nov. 2, 2012) (“Clearing Agency Standards Adopting Release”); Standards for 

Covered Clearing Agencies, Exchange Act Release No. 78961 (Sept. 28, 2016), 81 FR 70786, 

70891–92 (Oct. 13, 2016) (“CCA Standards Adopting Release”). 

669  There are currently three CMSPs and the Commission anticipates that one additional entity 

may seek to become a CMSP in the next three years.  The aggregate cost was estimated as follows: 

(Assistant General Counsel at $543/hour x 8 hours = $4,344) + (Compliance Attorney at 

$426/hour x 6 hours = $2,556) = $6,900 x 4 CMSPs equals $27,600.   

670  See CCA Standards Adopting Release, supra note 668, at 70899. 

671  This figure was calculated as follows: [(Compliance Attorney at $426/hour x 24 hours = 

$10,224) + (Computer Operations Manager at $514/hour x 10 hours = $5,140) = $15,364 x 4 

CMSPs = $61,456].  In addition, we estimate that the Inline XBRL requirement would require 

respondent CMSPs to spend $1,200 each year to license and renew Inline XBRL compliance 

software and/or services, and incur 3 internal burden hours to apply and review Inline XBRL tags 

for the disclosure requirements on the report, resulting in a total annual aggregate cost of $9,912 

[(Compliance Attorney at $426/hour x 3 hours = $1,278) + $1,200 in external costs = $2,478 x 4 

CMSPs = $9,912].  The total costs are the non-XBRL related costs ($61,546) + XBRL related 

costs ($9,912) = $71,368.  We have increased these estimates because, compared to the proposal, 

the reports required by Rule 17Ad-27 will contain significantly more disclosures, and each of those 

additional disclosures will need to be tagged.  In addition, respondent CMSPs that do not already 

have access to EDGAR would be required to file a Form ID so as to obtain the access codes that 



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(3) Market Participants – Investors, Broker-Dealers, 

Investment Advisers, and Bank Custodians 

The overall compliance costs that a market participant incurs will depend on the extent to 

which it is directly involved in functions related to clearance and settlement including trade 

confirmation/affirmation, asset servicing, and other activities.  For example, retail investors may 

bear few (if any) direct costs in a transition to a T+1 standard settlement cycle, because their 

respective broker-dealer handles the back-office functions of each transaction.  However, as is 

discussed below, this does not imply that retail investors will not face indirect costs from the 

transition, such as those passed through from broker-dealers or banks. 

Institutional investors may need to configure systems and update reference data, which may 

also include updates to trade funding and processing mechanisms, to operate in a T+1 

environment.  The Commission estimates that this will require an initial expenditure of $4.29 

million per entity.672  However, these costs may vary depending on the extent to which a particular 

institutional investor has already automated its processes.  The Commission expects institutional 

investors will incur minimal ongoing direct compliance costs after the initial transition to a T+1 

                                                 

are required to file or submit a document on EDGAR.  We anticipate that each respondent would 

require 0.30 hours to complete the Form ID, and for purposes of the PRA, that 100% of the burden 

of preparation for Form ID will be carried by each respondent internally.  Because two respondent 

CMSPs already have access to EDGAR, we anticipate that proposed amendments would result in a 

one-time nominal increase of 0.60 burden hours for Form ID, which would not meaningfully add 

to, and would effectively be encompassed by, the existing burden estimates associated with these 

reports.  

672  The estimate is based on the T+1 Playbook timeline, which estimates regulation- dependent 

implementation activity for trade systems, reference data, and testing activity to last six quarters.  

We assume 2 operations specialists (at $159 per hour), 2 programmers (at $316 per hour), and 1 

senior operations manager (at $426 per hour), working 40 hours per week.  (2 × $159+ 2 × $316 + 

1 × $426) × 6 × 13 × 40 = $4,293,120. 



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standard settlement cycle. 

Broker-dealers that serve institutional investors will not only need to configure their trading 

systems and update reference data, but may also need to update trade confirmation/affirmation 

systems, documentation, cashiering and asset servicing functions, depending on the roles they 

assume with respect to their clients.  The Commission estimates that, on average, each of these 

broker-dealers will incur an initial compliance cost of $8.74 million.673  The Commission expects 

that these broker-dealers will incur minimal ongoing direct compliance costs after the initial 

transition to a T+1 standard settlement cycle. 

Broker-dealers that also serve retail customers may need to spend significant resources 

during the implementation period to educate their clients about the shorter settlement cycle.  The 

Commission estimates that these broker-dealers will incur an initial compliance cost of $12.73 

million each.674  However, unlike previously mentioned market participants, the Commission 

expects that broker-dealers that serve retail investors may face significant one-time compliance 

costs after the initial transition to T+1.  Retail investors may require additional education and 

customer service, which may impose costs on their broker-dealers.  The Commission estimates that 

                                                 
673  The estimate is based on the T+1 Playbook timeline, which estimates regulation- dependent 

implementation activity for trade systems, reference data, documentation, asset servicing, and 

testing to last six quarters.  We assume 5 operations specialists (at $159 per hour), 5 programmers 

(at $316 per hour), and 1 senior operations manager (at $426 per hour), working 40 hours per week.  

(5 × $159 + 5 × $256 + 1 × $345) × 6 × 13 × 40 = $8,739,120. 

674  The estimate is based on the T+1 Playbook timeline, which estimates regulation- dependent 

implementation activity for trade systems, reference data, documentation, asset servicing, customer 

education and testing to last five quarters.  We assume 5 operations specialists (at $159 per hour), 

5 programmers (at $316 per hour), 5 trainers (at $256 per hour) and 1 senior operations manager 

(at $426 per hour), working 40 hours per week.  (5 × $159 + 5 × $316 + 5 × $256 + 1 × $426) × 6 

× 13 × 40 = $12,732,720. 



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a reasonable upper bound for the costs associated with this requirement is $30,000 per broker-

dealer.675  Assuming all clearing and introducing broker-dealers must educate retail customers, the 

upper bound for the aggregate costs of post implementation retail investor education will be 

approximately $38.2 million.676   

As discussed above in Part III.C, the Commission is modifying proposed Rule 15c6-2 to 

provide two options by which broker-dealers may comply with the rule, as adopted.  The two 

options are set forth in new paragraphs (a)(1) and (2).  The first option, reflected in paragraph 

(a)(1), is the proposed requirement for written agreements, modified in the ways discussed above.  

The second option, reflected in paragraph (a)(2), is an alternative to the written agreements 

requirement, in lieu of which a broker-dealer may choose to establish, maintain, and enforce 

written policies and procedures reasonably designed to ensure the completion of the allocation, 

confirmation, affirmation, or any combination thereof, for the transaction as soon as 

technologically practicable and no later than the end of the day on trade date in such form as 

necessary to achieve settlement of the transaction.  

The first option, reflected in paragraph (a)(1), will require broker-dealers to either enter 

into or modify existing written agreements with the relevant parties that ensure the completion of 

the allocation, confirmation, and affirmation process.  Such parties may be the customer, the 

customer’s investment adviser, the customer’s custodian, or another agent acting directly or 

indirectly on behalf of the customer.  The number of such agreements will vary depending on the 

                                                 
675  This estimate is based on the assumption that a broker-dealer chooses to educate customers 

using a 10-minute video that takes at most $3,000 per minute to produce.  See Exchange Act 

Release No. 76324 (Oct. 30, 2015), 80 FR 71388, 71529 n.1683 (Nov. 16, 2015).  

676  Calculated as $30,000 per broker-dealer × (92 broker-dealers reporting as self-clearing but 

not introducing + 1,114 broker-dealers reporting as introducing but not self-clearing + 68 broker-

dealers reporting as introducing and self-clearing) = $38,220,000. 



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number of relevant parties which will vary by the size of the broker-dealer, the number of 

customers, and the particular business relationship that the broker-dealer has with each of them.  

As discussed in Part III.B.5 above, several commenters expressed a number of concerns with the 

written agreement requirement as proposed.  First, commenters stated that in many scenarios 

written agreements do not currently exist between the parties to an institutional transaction and 

would be highly burdensome to establish specifically for the purpose of facilitating same day 

affirmation.  In addition, commenters expressed the view that the proposed written agreement 

requirement would create unnecessary practical burdens and costs.677   

The Commission acknowledges that in cases such as the ones described by commenters 

above—where these written agreements do not already exist, a client may not authorize its 

investment adviser to enter into this type of written agreement, or various third parties are relied 

upon to complete certain elements of the allocation, confirmation, and affirmation process—a 

requirement to enter into written agreements specifically to address the same-day affirmation 

objective may create substantial burdens and challenges for the parties to an institutional 

transaction.  Accordingly, as discussed in Part III.C above, the Commission is including in the 

final rule a second option, reflected in paragraph (a)(2), that specifies as an alternative to the 

written agreement requirement a policies and procedures requirement.   

The Commission believes that establishing policies and procedures as an alternative 

approach to compliance aside from entering into written agreements enables broker-dealers to 

avoid the substantial burdens and challenges that may be associated with negotiating written 

agreements in some cases.  However, the Commission also believes that it may be less costly for 

broker-dealers that already use written agreements to manage their commercial relationships with 

                                                 
677  See supra note 222. 



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their customers’ advisers, custodians or other agents using such agreements and that broker-dealers 

will generally chose to comply with the rule using the option that is less costly for that broker-

dealer’s particular circumstances. 

The second option, reflected in paragraph (a)(2) of new Rule 15c6-2, requires a broker-

dealer to establish, maintain, and enforce policies and procedures to ensure completion of the 

allocation, confirmation, affirmation, or any combination thereof, for a transaction as soon as 

technologically practicable and no later than the end of the day on trade date, in such form as 

necessary to achieve settlement.  As a general matter, most broker-dealers maintain policies and 

procedures to ensure the timely settlement of their transactions,678 and the securities industry 

considers achieving “same-day affirmation” an industry best practice.679  Nonetheless, the 

Commission believes that respondent broker-dealers will need to evaluate existing policies and 

procedures, identify any gaps, and then develop modifications to address those gaps.680  

Accordingly, the Commission estimates that respondent broker-dealers would incur an aggregate 

                                                 
678  See, e.g., SIFMA August 26th Letter, supra note 207, at 2. 

679  See supra note 515. 

680  Rule 15c6-2(b)(1) requires that the written policies and procedures that any broker or 

dealer may establish, maintain, and enforce as required by Rule 15c6-2 should, among other 

requirements: (1) Identify and describe any technology systems, operations, and processes that the 

broker or dealer uses to coordinate with other relevant parties, including investment advisers and 

custodians, to ensure completion of the allocation, confirmation, or affirmation process for the 

transaction, and (2) Describe how the broker or dealer plans to identify and address delays if 

another party, including an investment adviser or a custodian, is not promptly completing the 

allocation or affirmation for the transaction, or if the broker or dealer experiences delays in 

promptly completing the confirmation.  In cooperation with the broker or dealer, the relevant 

parties (including investment advisers and custodians) may incur some costs; however, those costs 

will vary depending on current systems at the relevant party and broker or dealer, the nature of the 

business relationship between the relevant party and the broker or dealer, and how the business of 

the relevant party is organized. 



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one-time burden of approximately 240 hours to create policies and procedures required under the 

rule,681  and that the cost of this one time burden per broker-dealer would be $88,880.682  The 

Commission estimates that approximately 411 broker-dealers would be subject to the requirements 

of Rule 15c6-2.683  The total industry cost is estimated to be approximately $36.5M.684 

Rule 15c6-2 also imposes ongoing burdens on a respondent broker-dealer as follows: (i) 

ongoing monitoring and compliance activities with respect to the written policies and procedures 

required by the rule; and (ii) ongoing documentation activities with respect to its obligations to 

measure, monitor, and document the rates of allocations, confirmations, and affirmations 

completed as soon as technologically practicable and no later than the end of the day on trade date.  

The Commission estimates that the ongoing activities required by Rule 15c6-2 would impose an 

aggregate annual burden on respondent broker-dealers of 480 hours,685 and a cost per broker-dealer 

                                                 
681  This figure was calculated as follows: (Assistant General Counsel for 20 hours + 

Compliance Attorney for 120 hours + Senior Risk Management Specialist for 20 hours + Risk 

Management Specialist for 80 hours) = 240 hours x 411 respondents = 98,640 hours.  

682  This figure was calculated as follows: (Assistant General Counsel at $543/hour x 20 hours 

= $10,860) + (Compliance Attorney at $426/hour x 120 hours = $51,120) + (Senior Risk 

Management Specialist at $417/hour x 20 hours = $8,340) + (Risk Management Specialist at 

$232/hour x 80 hours = $18,560) = $88,880 x 411 respondents = $36,529,680.   

683  See infra Part IX.C.2. 

684  See supra note 682. 

685  This figure was calculated as follows: (Assistant General Counsel for 48 hours + 

Compliance Attorney for 192 hours + Senior Risk Management Specialist for 48 hours + Risk 

Management Specialist for 192 hours) = 480 hours x 411 respondents = 197,280 hours. 



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of $172,416.686  The total industry cost is estimated to be approximately $107M.687 

The Commission believes this estimate is an upper bound on the compliance costs 

associated with the second option, reflected in paragraph (a)(2) of new Rule 15c6-2 for at least two 

reasons.  First, broker-dealers may choose the first option, reflected in paragraph (a)(1), if it is less 

burdensome for them to do so.  Second, if a large number of broker-dealers chose the second 

option it may be more efficient for a third party to develop a set of best practices that could form 

the basis of the policies and procedures required for each broker-dealer that choses the second 

option.   

Custodian banks will need to update their asset servicing functions to comply with a shorter 

settlement cycle.  The Commission estimates that custodian banks will incur an initial compliance 

cost of $4.29 million,688 and expects custodian banks to incur minimal ongoing compliance costs 

after the initial transition because the Commission believes that most of the costs will stem from 

pre-migration updates and testing. 

The amendment to Rule 204-2 will require registered investment advisers to make and keep 

records of confirmations they receive and of allocations and affirmations they send or receive for 

                                                 
686  This figure was calculated as follows: (Assistant General Counsel at $543/hour x 48 hours 

= $26,064) + (Compliance Attorney at $426/hour x 192 hours = $81,792) + (Senior Risk 

Management Specialist at $417/hour x 48 hours = $20,016) + (Risk Management Specialist at 

$232/hour x 192 hours = $44,544) = $172,416 x 411 respondents = $70,862,976.   

687  This figure was calculated as follows: $36,529,680 (industry one-time burden) + 

$70,862,976 (industry ongoing burden) = $107,392,656.   

688  The estimate is based on the T+1 Playbook timeline, which estimates regulation-dependent 

implementation activity for asset servicing and testing to last six quarters.  We assume 2 operations 

specialists (at $159 per hour), 2 programmers (at $316 per hour), and 1 senior operations manager 

(at $426 per hour), working 40 hours per week.  (2 × $159 + 2 × $316 + 1 × $426) × 6 × 13 × 40 = 

$4,293,120. 



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securities transactions that are subject to the requirements of Rule 15c6-2(a).  Based on Form ADV 

filings, approximately 15,160 advisers registered with the Commission are required to make and 

keep copies of certain books and records relating to their advisory business.689  The Commission 

further estimates that of these advisers, 2,169 registered advisers will not retain the required 

records under the final rule because they do not have any institutional advisory clients.  Therefore, 

the Commission estimates that 12,991 advisers will be subject to the final amendment to Rule 204-

2 under the Advisers Act because they will facilitate transactions with a broker or dealer that is 

subject to the requirements of Rule 15c6-2(a) and therefore will be subject to the related 

recordkeeping requirement.690  As discussed above, based on staff experience, the Commission 

believes that many advisers already have recordkeeping processes in place to make and keep 

records of confirmations received, and allocations and affirmations sent or received.  The 

Commission believes these are customary and usual business practices for many advisers, but that 

some small and mid-size advisers may not currently retain these records.  Further, the Commission 

believes that the vast majority of these books and records are kept in electronic fashion with an 

ability to capture a date and time stamp, such as in a trade order management or other 

recordkeeping system, through system logs of file transfers, email archiving, or as part of DTC’s 

Institutional Trade Processing services, but that some advisers maintain paper records (e.g., 

confirmations) and/or communicate allocations by telephone.  In addition, as noted in Part III.C 

above, we believe that up to 70% of institutional trades are affirmed by custodians, and therefore 

                                                 
689  See infra note 4 to Table 2. 

690  See id. 



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advisers may not retain or have access to the affirmations these custodians sent to brokers or 

dealers.691 

In a change from the proposal, we estimate three-hour information collection burden 

annually per impacted adviser associated with the new recordkeeping requirements.692  We 

estimate that the amendments to Rule 204-2 will result in an additional internal cost of 

approximately $3.02 million per year.693  This estimate takes into account potential additional 

burdens associated with the new recordkeeping requirement for advisers that do not currently 

retain these records, but will be required to do so under the final rule.  These estimates are also 

designed to address any burdens for advisers that may retain such documents, but do not do so 

electronically and/or do not time and date stamp such documents or otherwise retain the 

documents in a way that complies with the final rule.694  In addition, the revised estimates factor in 

any costs associated with receiving copies of, or having access to, required records that are 

                                                 
691  See DTCC ITP Forum Remarks, supra note 264.  

692  The Commission believes that most of the necessary records are already being retained as 

advisers generally retain their communications and trade instructions to comply with other 

recordkeeping obligations.  If these records are not being kept, the Commission believes the 

burden will be small to start retaining them because the requirement pertains to records that are 

sent or received and does not require new records to be created.   

693  The estimate assumes that the amendments to Rule 204-2 will result in an incremental 

increase in the collection of information burden estimate by 3 hours for 12,991 investment 

advisers.  For each such adviser, we assume 1.5 hour for a compliance clerk (at $82 per hour) and 

1.5 hour for a general clerk (at $73 per hour) = $233 per investment adviser * 12,991 investment 

advisers = an incremental increase of $3,020,408 in internal costs. 

694  For more discussion, see infra Part IX.A.Conformed to Federal Register version 

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retained by a custodian or other third-party, including cost-savings associated with the adviser’s 

ability to rely on third parties to meet its recordkeeping obligations under the rule.695    

(4) Indirect Costs 

In estimating these implementation costs, the Commission notes that market participants 

who bear the direct costs of the actions they undertake to comply with the amendment to Rule 

15c6-1 may pass these costs on to their customers.  For example, retail and institutional investors 

might not directly bear the cost of all of the necessary upgrades for a T+1 standard settlement 

cycle, but might indirectly bear these costs as their broker-dealers might increase their fees to 

amortize the costs of updates among their customers.  The Commission is unable to quantify the 

overall magnitude of the indirect costs that retail and institutional investors may bear, because such 

costs will depend on the market power of each broker-dealer, and each broker-dealer’s willingness 

to pass on the costs of migration to a T+1 standard settlement cycle to its customers.  However, the 

Commission believes that in situations where broker-dealers have little or no competition, broker-

dealers will have an incentive to absorb part of the cost increase.  As discussed in Part 

VIII.C.5.b)(3) above, this could be as high as the full amount of the estimated $8.74 million for 

each broker-dealer that serves institutional investors, and $12.73 million for each broker-dealer 

that serves institutional and retail investors.  However, in situations where broker-dealers face 

heavy competition for customers, there may be little or no economic profits and price may equal 

marginal cost so an increase in costs could be fully passed through to the customer.696   

As noted in Part VIII.B.4, the ability of market participants to pass implementation costs on 

                                                 
695  One commenter recommended that the Commission update these estimates.  See infra Part 

IX.A for a discussion of the commenter’s recommendation and the Commission’s justification for 

the burden estimates. 

696  See supra note 621. 



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to customers likely depends on their relative bargaining power.  For example, CCPs, like many 

other utilities, exhibit many of the characteristics of natural monopolies and, as a result, may have 

market power, particularly relative to broker-dealers who submit trades for clearing.  This means 

that CCPs may be able to share implementation costs they directly face related to shortening the 

settlement cycle with broker-dealers through higher clearing fees.  Conversely, to the extent that 

institutional investors have market power relative to broker-dealers, broker-dealers may not be in a 

position to impose indirect costs on them. 

(5) Industry-Wide Costs 

To estimate the aggregate, industry-wide cost of a transition to a T+1 standard settlement 

cycle, the Commission takes its own per-entity estimates and multiplies them by our estimate of 

the respective number of entities.  The Commission estimates that there are 1,229 buy-side firms, 

160 self-clearing broker-dealers, and 48 custodian banks.697  Additionally, while there are three 

Matching/ETC Providers, the Commission believes that only one of these is currently providing 

services in the U.S.  We estimate there are 1,274 broker-dealers that will incur investor education 

costs.  One way to establish a total industry initial compliance cost estimate is to multiply each 

estimated per-entity cost by the respective number of entities and sum these values, which results 

in an estimate of $7.76 billion.698  The Commission, however, believes that this estimate is likely 

                                                 
697  The estimate for the number of buy-side firms is based on the Commission’s 13(f) holdings 

information filers with over $1 billion in assets under management, as of December 31, 2020.  The 

estimate for the number of broker-dealers is based on FINRA FOCUS Reports of firms reporting 

as self-clearing.  See supra note 525 and accompanying text.  The estimate for the number of 

custodian banks is based on the number of “settling banks” listed in DTC’s Member Directories, 

http://www.dtcc.com/client-center/dtc-directories.   

698  Calculated from estimates derived above in this section (Part VIII.C.5) as 160 broker-

dealers (self-clearing) × $12,733,000 + + 48 custodian banks × $4,293,000 + 1,229 buy-side firms 

× $4,293,000 + 4 Matching/ETC Providers × ($16,149,000 + $6,900) + 2 FMUs × $16,149,000 + 

12,991 IAs x $233 + 411 broker-dealers with institutional customers x $88,880$ 7,763M. 

http://www.dtcc.com/client-center/dtc-directories


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to overstate the true initial cost of transition to a T+1 standard settlement cycle for a number of 

reasons.  First, our per-entity estimates do not account for the heterogeneity in market participant 

size, which may have a significant impact on the costs that market participants face.  While the 

BCG Study included both estimates of the number of entities in different size categories as well as 

estimates of costs that an entity in each size category is likely to incur, it did not provide sufficient 

underlying information to allow the Commission to estimate the relationship between participant 

size and compliance cost and, thus, we cannot produce comparable estimates.  The Commission 

solicited comment on the extent to which market participants believe that the compliance costs for 

Rule 15c6-1(a) would scale with market participant size and did not receive data that could be used 

to improve these estimates. 

Second, investments by third-party service providers may mean that many of the estimated 

compliance costs for market participants are duplicated.  The BCG Study suggests that “leverage” 

from service providers may yield a savings of $194 million, reducing aggregate costs by 

approximately 29%.699  In the T+1 Proposing Release, the Commission sought further comment on 

the extent to which the efficiencies generated by the investments of service providers might reduce 

the compliance costs of market participants.  Taking into account potential cost reductions due to 

repurposing existing systems and using service providers as described above, the Commission 

believes that $5.51 billion represents a reasonable range for the total industry initial compliance 

costs.700   

In addition to these initial costs, a transition to a shorter settlement cycle may also result in 

certain ongoing industry-wide costs.  Though the Commission believes that a move to a shorter 

                                                 
699  See BCG Study, supra note 565, at 79. 

700  The lower bound of this range is calculated as ($7.76 billion x (1 – 0.29)) = $5.51 billion. 



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settlement cycle will generally bring with it a reduced reliance on manual processing, a shorter 

settlement cycle may also exacerbate remaining operational risk.  This is because a shorter 

settlement cycle will provide market participants with less time to resolve errors.  For example, if 

there is an entry error in the trade match details sent by either counterparty for a trade, both 

counterparties will have one extra day to resolve the error under the baseline than in a T+1 

environment.  For these errors, a shorter settlement cycle may increase the probability that the 

error ultimately results in a settlement fail.  However, the Commission believes that a large variety 

of operational errors are possible in the clearance and settlement process, and some of these errors 

are likely to be infrequent, the Commission is unable to quantify the impact that a shorter 

settlement cycle may have on the ongoing industry-wide costs stemming from a potential increase 

in operational risk. 

D. Consideration of Reasonable Alternatives 

1. Delete 15c6-1(c) to T+2 

In the T+1 Proposing Release the Commission proposed to delete paragraph (c) of the 

rule,701  which would, in conjunction with the proposed amendment to paragraph (a), establish a 

T+1 standard settlement cycle for firm commitment offerings priced after 4:30 p.m. ET.  The 

Commission requested comment on whether, as an alternative to deleting paragraph (c), it be 

amended in order to shorten the settlement cycle for firm commitment offerings to T+2.  In 

response to comments received and as discussed in Part II.B.3 and Part II.C.4 above, the 

Commission is adopting this alternative.   

                                                 
701  See T+1 Proposing Release, supra note 2, at 10448–49. 



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2. Adopt 17Ad-27 to Require Certain Outcomes 

The Commission proposed Rule 17Ad-27 to require a CMSP establish, implement, 

maintain, and enforce policies and procedures to facilitate straight-through processing for 

transactions involving broker-dealers and their customers.702  As proposed, Rule 17Ad-27 would 

require a CMSP to submit every twelve months to the Commission a report that describes the 

following: (i) the CMSP’s current policies and procedures for facilitating straight-through 

processing; (ii) its progress in facilitating straight-through processing during the twelve month 

period covered by the report; and (iii) the steps the CMSP intends to take to facilitate and promote 

straight-through processing during the twelve month period that follows the period covered by the 

report.703    

The Commission proposed a “policies and procedures” approach in developing the rule 

because it believes such an approach will remain effective over time as CMSPs consider and offer 

new technologies and operations to improve the settlement of institutional trades.  The 

Commission also believes that improving the CMSPs’ systems to facilitate straight-through 

processing can help market participants consider additional ways to make their own systems more 

efficient.  In addition, a “policies and procedures” approach can help ensure that a CMSP 

considers, in a holistic fashion, how the obligations it applies to its users will advance the 

implementation of methodologies, operational capabilities, systems, or services that support 

straight-through processing. 

The Commission has considered as an alternative to the policies and procedures approach 

in proposed Rule 17Ad-27, proposing a rule to require CMSPs to achieve certain outcomes that 

                                                 
702  See id. at 10457–61. 

703  As adopted, the Rule 17Ad-27 reporting requirement has been revised.  See supra Part V.C. 



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would facilitate straight-through processing.  For example, the Commission considered a 

requirement that a CMSP do the following: (i) enable the users of its service to complete the 

matching, confirmation, or affirmation of the securities transaction as soon as technologically and 

operationally practicable and no later than the end of the day on which the transaction was effected 

by the parties to the transaction; or (ii) forward or otherwise submit the transaction for settlement 

as soon as technologically and operationally practicable, as if using fully automated systems. 

However, as discussed in Part V.C.1. above, the Commission believes that a policies and 

procedures approach will better meet the objectives of promoting STP by requiring policies and 

procedures that include a holistic review and framework for considering how systems and 

processes facilitate straight-through processing, and that can adapt over time to changes in 

technology and operations, both among and beyond the CMSP’s systems.  Therefore the 

Commission is adopting new Rule 17Ad-27 as proposed but with the two modifications discussed 

above. 

3. Adopt Rule Changes to Rule 15c6-2 as recommended by SIFMA’s August 

Comment Letter 

As previously mentioned in Part III.B.7., the Commission received an additional comment 

letter from SIFMA addressing alternatives to proposed Rule 15c6-2.704  SIFMA recommended that 

the Commission revise proposed Rule 15c6-2 to replace the written agreement requirement with a 

requirement for policies and procedures that can support faster processing, which would allow 

individual firms to advance the Commission’s interest in same-day affirmation while ensuring that 

                                                 
704  See SIFMA August 26th Letter, supra note 194, at 2–3.  



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broker-dealers can design policies and procedures tailored to their business models, products, and 

unique customer bases.705   

SIFMA’s recommendation included a number of elements.  First, SIFMA requested that 

Rule 15c6-2 be revised to require policies and procedures reasonably designed to maintain timely 

settlement rates.706  Second, SIFMA recommended that such policies and procedures: (i) address 

the timing of allocations, confirmations, and affirmations to ensure timely settlement; (ii) include a 

communication plan with market participants; (iii) provide a description of a broker-dealers’ 

ability to monitor compliance; (iv) include the development of controls and supervisory 

procedures; and (v) include the development of metrics to measure compliance.707   

The Commission agrees that the policies and procedures approach is beneficial, and thus is 

revising final Rule 15c6-2 to allow broker-dealers to achieve compliance with the rule either by 

entering into written agreements or by establishing, implementing, and maintaining policies and 

procedures. Economically, options always have a positive value when they allow the holder to 

choose amongst a menu of choices; in this case, the ability to choose amongst approaches should 

present a benefit to broker-dealers, who can better assess which one of these two alternatives 

provides the most efficient path to compliance with the rule. Discussion of the costs for each of 

these alternatives can be found in section C.5.b)(3). 

In terms of what the policies and procedures dictate, the Commission believes, as 

mentioned in Part III.B.7, that timely settlement is a separate, if related, objective from same-day 

                                                 
705  See id. at 2.  In Part III.B.5., above, the Commission has previously discussed why it 

believes it appropriate to retain the written agreement requirement in the rule, while also adding an 

option to establish, maintain, and enforce written policies and procedures.  

706  See id. 

707  See id. at 2–3.  



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affirmation. As discussed in Part III.B.1 above, the Commission continues to believe that 

improving affirmation rates on trade date is an objective separate and apart from, though related to, 

shortening the settlement cycle, because it promotes an orderly settlement process regardless of the 

length of the settlement cycle.   

Other than the different specifications of the policies and procedures just mentioned, the 

Commission believes that it is generally adopting SIFMA’s recommendations with respect to: 

addressing the timing of allocations, confirmations, and affirmations to ensure timely settlement; 

including a communication plan with market participants; providing a description of a broker-

dealers’ ability to monitor compliance; including the development of controls and supervisory 

procedures; and including the development of metrics to measure compliance. 

4. Replace the Written Agreement Requirement in Proposed Rule 15c6-2 with 

a Principles-Based Approach 

The Commission received comment letters from the Investment Company Institute (ICI) and 

from the American Securities Association (ASA) that advocate for a principles-based approach 

that allows broker-dealers to adopt their own internal policies that promote the allocation, 

confirmation and affirmation of trades for relevant customers.  That would include, according to 

ICI, a requirement that broker-dealers adopt policies and procedures “reasonably designed” to 

ensure that allocations, confirmations, and affirmations are completed on a timeline that allows 

settlement on T+1. 

The Commission is mindful that each broker-dealer is best suited to assess the challenges 

that it faces in accelerating the settlement process.  Therefore, as already discussed, the 

Commission is providing broker-dealers with the additional choice of a policies and procedures 

alternative besides the written agreements requirement.  The Commission believes that the policies 

and procedures alternative affords broker-dealers sufficient flexibility without sacrificing the main 



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objective of the rule, which is solving the collective action problem of improving the overall 

current affirmation rates of 68%.  A principles-based approach relies almost exclusively on the 

existing commercial incentives discussed on Part III.B.1, which the Commission already 

considered insufficient to overcome the incremental gains in same-day affirmation rates to date. 

5. Select a Later Implementation Date for Adoption of the Rule 

The Commission received a number of comment letters708 that recommend a later date than 

the proposed implementation date of March 31, 2024.  Reasons given by the industry for more 

time include the additional convenience attendant to a transition to T+1 settlement over a three-day 

weekend (e.g., Memorial Day, Labor Day); the possibility of coordinating the T+1 settlement 

transition with a closely aligned market (i.e., Canada on Labor Day 2024); and the ability to have 

more thorough preparation and testing protocols, among others.   

The Commission acknowledges that there are additional costs to an earlier transition date, 

as a more compressed timeline to implementation will have an opportunity cost over scarce 

operational resources.  Additional time also allows for more robust preparation and testing.709  

Nevertheless, postponing the implementation of T+1 settlement delays the realization of the 

market-wide benefits of the rule.  While there may be increases in up-front costs from an earlier 

date, there are also benefits attendant to general reductions in liquidity, credit and market risk.   

                                                 
708 See, e.g., DTCC Letter, supra note 16, at 4; SIFMA April Letter, supra note 16, at 4; State 

Street Letter, supra note 16, at 5; MFA Letter, supra note 16, at 2; ICI Letter, supra note 16, at 2; 

AGC April Letter, supra note 16, at 4; CCMA April Letter, supra note 16, at 1; RMA Letter, supra 

note 16, at 8; IAA April Letter, supra note 16, at 2; IIAC Letter, supra note 16, at 2; ASA Letter, 

supra note 16, at 1-2; OCC Letter, supra note 16, at 3; STA Letter, supra note 16, at 2. 

709  See supra Part VII.A.   



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Periods of high volatility could materialize on any date between the implementation date and any 

of the suggested dates, and such occurrence would reduce the benefits of the rule precisely at the 

moment when it is most useful.  Given the extent of planning, operational changes, and testing 

necessary to achieve a successful and orderly transition to a T+1 standard settlement cycle,710 the 

Commission is moving the compliance date to Tuesday, May 28, 2024, which follows a Federal 

holiday for which both markets and banks will be closed, providing market participants with a 

three-day weekend to facilitate the transition to a T+1 standard settlement cycle, and providing 

market participants an additional two months.  The Commission believes that a May 28, 2024, 

compliance date will ensure an orderly transition to a T+1 standard settlement cycle that realizes 

the substantial benefits of shortening the settlement cycle as soon as possible. 

IX. Paperwork Reduction Act 

As discussed in the proposing release, Rule 17Ad-27 and the amendments to Rule 204-2(a) 

contain “collection of information” requirements within the meaning of the Paperwork Reduction 

Act of 1995 (“PRA”).711  The Commission submitted the proposed collections of information to 

the Office of Management and Budget (“OMB”) for review in accordance with the PRA.  For the 

amendments to Rule 204-2(a), the title of the information collection is “Rule 204-2 under the 

Investment Advisers Act of 1940” (OMB Control No. 3235-0278).  For Rule 17Ad-27, the title of 

the information collection is “Shortening the Securities Transaction Settlement Cycle” (OMB 

Control No. 3235-0799).712  In addition, the modifications to Rule 15c6-2 contain “collection of 

                                                 
710  Id. 

711  See 44 U.S.C. 3501 et seq. 

712  The T+1 Proposing Release stated that the Commission intended to include Rule 17Ad-27 

in an existing information collection, “Clearing Agency Standards for Operation and Governance” 



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information” requirements, which will be submitted to OMB for review in accordance with the 

PRA.  An agency may not conduct or sponsor, and a person is not required to respond to, a 

collection of information unless it displays a currently valid OMB control number. 

The Commission received several comments concerning its PRA estimates for the 

proposed amendment to Rule 204-2, which are discussed below.  In response to these comments, 

and in view of the changes between the proposed and adopted recordkeeping requirements, the 

Commission is modifying its PRA estimates, as reflected in Part IX.A.  The Commission is also 

modifying its PRA estimates for Rule 17Ad-27 in view of the changes between the proposed and 

adopted rule requirements, as explained in Part IX.B.  In addition, the Commission corrects a 

tabulation error for Rule 17Ad-27 that was included in the T+1 Proposing Release. 

Finally, because the modifications to Rule 15c6-2 discussed in Part III.C would impose 

PRA burdens, the Commission below provides PRA estimates for Rule 15c6-2.  The Commission 

will submit these burdens to OMB for review in accordance with the PRA.713 

A. Advisers Act Rule 204-2 

Under section 204 of the Advisers Act, investment advisers registered or required to 

register with the Commission under section 203 of the Advisers Act must make and keep for 

prescribed periods such records (as defined in section 3(a)(37) of the Exchange Act), furnish 

copies thereof, and make and disseminate such reports as the Commission, by rule, may prescribe 

as necessary or appropriate in the public interest or for the protection of investors.  Advisers Act 

                                                 

(OMB Control No. 3235-0695).  The Commission has subsequently determined to request a new 

OMB Control Number for the collection of information in Rule 17Ad-27. 

713  See supra note 712 and accompanying text (providing the title of the information collection 

and the OMB control number for these rulemakings, “Shortening the Securities Transaction 

Settlement Cycle” (OMB Control No. 3235-0799)). 



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Rule 204-2 sets forth the requirements for maintaining and preserving specified books and records.  

This collection of information is found at 17 CFR 275.204-2 and is mandatory.  The Commission 

staff uses the collection of information in its regulatory and examination program.  Responses to 

the requirements of the proposed amendments to Rule 204-2 that are provided to the Commission 

in the context of its regulatory and examination program are kept confidential subject to the 

provisions of applicable law.714  

The final amendments to Rule 204-2 will require all registered investment advisers to make 

and keep certain records with respect to any securities transaction that is subject to the 

requirements of Rule 15c6-2(a). Those records include each confirmation received, and any 

allocation and each affirmation sent or received, with a date and time stamp for each allocation and 

affirmation that indicates when the allocation and affirmation were sent or received.   

The proposed amendments to Rule 204-2 would have required recordkeeping by any 

registered adviser that is a party to a contract under proposed Rule 15c6-2 while the final rule 

references more specifically transactions subject to Rule 15c6-2(a), although both concern the 

same subset of transactions. We estimate that 12,991 advisers, or 86% of the total registered 

advisers subject to amended Rule 204-2, will facilitate transactions subject to Rule 15c6-2(a) and 

thus be subject to the amendments.715 As discussed in the T+1 Proposing Release, the Commission 

stated that based on staff experience, it believed that many advisers already have processes in place 

to make and keep records of confirmations received, and allocations and affirmations sent as part 

of their customary and usual business practices, though recognizing that some small and mid-sized 

                                                 
714  See section 210(b) of the Advisers Act, 15 U.S.C. 80b–10(b). 

715  Based on Form ADV data as of June 2022. See also infra note 4 to Table 2. 



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advisers do not currently retain these records, and some advisers still maintain certain records in 

paper and/or communicate by telephone.716  Paper records are less likely to be date and time 

stamped, and those communicated by telephone are not date or time-stamped at all, unless a 

memorial of the communication is retained). The Commission also stated that it believed many 

such records are electronically maintained, and are sent or received electronically, in which case 

such documents were already date and time stamped in many instances.717 

Some commenters discussed aspects of the burden estimates for the proposed amendments 

to Rule 204-2.  One commenter stated that the Commission has underestimated the time and cost 

burdens for implementing the proposed recordkeeping requirements but did not provide specific 

estimates.718  As one basis for that statement, the commenter explained that most investment 

advisers use third parties to perform or communicate allocations or affirmations, and do not 

necessarily currently retain the records themselves.719  This commenter stated that if such advisers 

were required to retain those records on an ongoing basis, they would likely incur costs associated 

with directing the third parties to electronically copy the investment adviser on any allocations or 

affirmations and ensuring that their own systems and infrastructure could adequately accommodate 

these additional records.  The commenter suggested that if advisers could not rely on third parties 

                                                 
716  See T+1 Proposing Release, supra note 2, at 10494. 

717  See T+1 Proposing Release, supra note 2, at 10456–57, 10490, 10494.  

718  See IAA April Letter, supra note 16, at 7.  

719  Id. (noting the Commission’s estimate in the T+1 Proposing Release that 70 percent of 

investment adviser trades are affirmed by their custodian is consistent with information received 

from IAA members, and also noting that advisers may utilize separately managed accounts where 

trading and allocations are conducted by a third-party investment manager under an agreement 

with the investment adviser). 



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to meet their recordkeeping obligations, the Commission should update its estimates, while also 

asking the Commission to review the potential cost savings associated with allowing advisers to 

use third parties to retain the required records.720  In this regard, we note that investment advisers 

may continue to rely on third parties to meet their recordkeeping obligations, including those 

required by the final amendments to Rule 204-2.721   

Several comments also addressed timestamping. One suggested that the costs could be 

higher than we estimated in the proposal,722 while another stated that timestamps are already 

included in electronic communications protocols.723  We agree, consistent with the latter comment, 

that timestamps are generally included in many electronic communications and many advisers 

currently send allocations and affirmations electronically.   

In a change from the proposal, we estimate that each adviser that will be subject to the new 

recordkeeping requirements will incur an additional three-hour burden each year, increased from 

two hours as proposed. We are not amortizing any of the burdens as proposed, because we believe 

investment advisers that will be subject to the new requirements will incur the same hour burden 

initially and then annually thereafter.724   

                                                 
720  Id. 

721  See supra Part IV.C.  As previously noted, we estimate that 70% of trades are affirmed by 

custodians, which may retain the affirmations on the adviser’s behalf. 

722  AIMA Letter, supra note 29. 

723  FIX Trading Letter, supra note 218. 

724  The T+1 Proposing Release amortized the annual two-hour burden over three years, 

resulting in an annual internal burden of 0.667 hours per adviser per year. 



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The Commission estimates that 12,991 registered advisers will be subject to the new 

recordkeeping requirements because they manage institutional accounts and are thus likely to 

facilitate transactions that are subject to the requirements of Rule 15c6-2(a).725 This estimate takes 

into account potential additional burdens associated with the new recordkeeping requirement for 

advisers that do not currently make and retain these records, but will be required to do so under the 

final rule. The revised estimates are also designed to address any burdens for advisers that may 

make and retain such documents, but do not do so electronically and/or do not time and date stamp 

such documents or otherwise retain the documents in a way that complies with the final rule.  In 

addition, the revised estimates factor in any costs associated with receiving copies of, or having 

access to, required records that are retained by a custodian or other third-party, offset by cost-

savings associated with the adviser’s ability to rely on third parties to meet its recordkeeping 

obligations under the rule. As discussed above, we believe that many advisers already have 

recordkeeping processes in place to retain the new required records, and may only incur minimal 

                                                 
725  The Commission is using a different methodology than the proposal in order to simplify the 

calculation and include more advisers that we estimate will be subject to the new recordkeeping 

requirement. The final estimate includes one category of 12,991 advisers that will be subject to the 

new recordkeeping requirements because they manage institutional accounts and are thus likely to 

facilitate transactions that are subject to the requirements of Rule 15c6-2(a). The estimate excludes 

advisers that only have individuals or high-net-worth individuals as clients in Item 5.D. and do not 

report participation in any wrap fee program in Item 5.I., and advisers that do not report any 

regulatory assets under management in Item 5.F. In contrast, the T+1 Proposing Release estimated 

11,283 of advisers that are subject to Rule 204-2, would enter a contract with a broker or dealer 

under proposed Rule 15c6-2 and therefore be subject to the related proposed recordkeeping 

amendment. The estimate included three categories of advisers that would have had the same 

burden hours: (1) 220 small and mid-size advisers that have institutional clients that we believed 

do not maintain the proposed records; (2) 113 advisers that have institutional clients that staff 

estimated do not send allocations or affirmations; and (3) 7,898 advisers with institutional clients 

that the staff estimated make institutional trades that are affirmed by custodians and therefore do 

not maintain the proposed affirmations.  



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additional burdens to comply with the final recordkeeping requirements. However, some advisers 

may need to spend more time to modify their recordkeeping systems. Accordingly, the three-hour 

burden estimate reflects an average across all advisers likely to be subject to the new requirements. 

Finally, in response to the comment that our staffing cost estimates were too low, we have 

increased the hours burden to three and the time we estimate the compliance clerk and general 

clerk will spend on the collection of information, and we updated the wage rates to account for 

inflation.726 

In our most recently approved Paperwork Reduction Act submission for Rule 204-2, we 

estimated for Rule 204-2 a total annual aggregate hour burden of 2,764,563 hours, and a total 

annual aggregate internal cost burden of $175,980,426.727  The estimated additional burdens 

associated with the final amendments to Rule 204-2, which take into account an increase in annual 

hour burdens and internal cost burdens due to the comments received and an increase in the 

internal wage rates due to an updated inflation adjustment reflecting inflation through the end of 

2022, are reflected in the table below.  

Table 2.  Summary of burden estimates for the final amendments to Rule 204-2. 

Advisers Annual internal 

hour burden1 

Internal 

Wage rate2 

Internal time cost per year3 

 

 

12,991 advisers4 

3 hours per adviser5 

 

Incremental aggregate 

burden = 38,973 hours 

(12,991 advisers x 3 hours = 

38,973 hours) 

 

 

$77.50 

 per hour 

 

 

Incremental aggregate internal cost = 

$3,020,408 

($77.5 x 38,973 hours = 

$3,020,408) 

 

   

 2,764,563 aggregate hours 

per year 

 

$175,980,426 

                                                 
726  The wage rate estimate takes into account an updated inflation adjustment since the 

proposal and estimates that the higher paid compliance clerk will spend approximately 50% of the 

time performing the function instead of 17% as estimated in the T+1 Proposing Release.  

727  Supporting Statement for the Paperwork Reduction Act Information Collection Submission 

for Revisions to Rule 204-2, OMB Report, OMB 3235-0278 (Aug. 2021). 



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Currently approved 

aggregate burden6 

 
 

Estimated revised 

aggregate burden7 

 

2,803,536 aggregate hours 

per year 

 

 

$179,000,8348 

 

Notes: 

1.  In a change from the Proposing Release, we are not amortizing the initial internal hour burden over a three-year period. Instead, 

we believe that the estimated internal hour burdens associated with the final amendments will be annual burdens.   

2.  As with our estimates relating to the previous amendments to Advisers Act Rule 204-2, the Commission expects that 

performance of these functions will most likely be allocated between compliance clerks and general clerks.  Data from SIFMA's 

Office Salaries in the Securities Industry 2013, modified by Commission staff to account for an 1800-hour work-year and inflation 

through the end of 2022, and multiplied by 2.93 to account for bonuses, firm size, employee benefits and overhead, suggest that 

costs for these position are $82 and $73, respectively.  A blended hourly rate is therefore: ($82 + $73) ÷ 2 = $77.5 per hour.   

3.  Under the currently-approved PRA for Rule 204-2, there is no cost burden other than the internal cost of the hour burden 

described herein, and we believe that the amendments will not result in any external cost burden. 

4. We estimate there were 15,160 total registered advisers as of June 2022 based on Form ADV filings received through the 

Investment Adviser Registration Depository (IARD) through August 31, 2022.  Of these 15,160 advisers, we estimate that 12,991 

will be subject to the new recordkeeping requirements because they manage institutional accounts and are thus likely to facilitate 

transactions that are subject to the requirements of Rule 15c6-2(a).  We have excluded advisers that only have individuals or high-

net-worth individuals as clients in Item 5.D. and do not report participation in any wrap fee program in Item 5.I.  We also excluded 

advisers that do not report any regulatory assets under management in Item 5.F. 

5.  We estimate an average of three hours per adviser to update procedures and instruct personnel to make and retain the required 

records in the advisers’ recordkeeping systems, including any such documents it may receive in paper format and does not currently 

retain, and to actually retain those records for the required retention periods. Because we believe that many advisers already have 

recordkeeping systems to accommodate these records, which include, at a minimum, spreadsheet formats and email retention 

systems that have an ability to capture a date and time stamp, such advisers are likely to incur minimal incremental costs associated 

with the new recordkeeping requirement.   

6.  See supra note 727. 

7.  The new recordkeeping burden will add 38,973 aggregate annual hours, resulting in a revised estimate of 2,803,536 aggregate 

hours for all registered advisers subject to these amendments to Rule 204-2 (2,764,563 current hours + 38,973 additional hours = 

2,803,536 aggregate hours per year). The new recordkeeping burden would also add $3,020,408 in aggregate internal costs, 

resulting in a revised estimate of $179,000,834 in aggregate internal costs ($175,980,426 current internal costs + $3,020,408 

additional internal costs = $179,000,834). 

8. This reflects a reduction in the internal time cost per year that appeared in the T+1 Proposing Release, to account for corrections 

to the internal time costs calculations as they appeared in the T+1 Proposing Release. 

B. Exchange Act Rule 17Ad-27 

As discussed in the T+1 Proposing Release, the purpose of the collections under Exchange 

Act Rule 17Ad-27 is to ensure that CMSPs facilitate the ongoing development of operational and 

technological improvements associated with the straight-through processing of institutional trades.  

The collections are mandatory.  To the extent that the Commission receives confidential 



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information pursuant to this collection of information, such information would be kept confidential 

subject to the provisions of applicable law.728 

Respondents under this rule are the three CMSPs to which the Commission has granted an 

exemption from registration as a clearing agency, as previously discussed in the T+1 Proposing 

Release.  The Commission also continues to anticipate that one additional entity may seek to 

become a CMSP in the next three years, and so for purposes of this PRA collection the 

Commission has assumed four respondents. 

As discussed in Part V.C.1, Rule 17Ad-27(a) requires a CMSP to establish, implement, 

maintain, and enforce written policies and procedures reasonably designed to facilitate straight-

through processing.  Although the Commission has modified the text of Rule 17Ad-27(a) to 

provide that such policies and procedures be “reasonably designed,” the Commission believes that 

the initial burden under this portion of the rule is unchanged.  As discussed in the T+1 Proposing 

Release, the Commission continues to estimate that respondent CMSPs would incur an aggregate 

one-time burden of approximately 56 hours to create such new policies and procedures,729 and that 

the aggregate cost of this one time burden would be $27,600.730 

                                                 
728  See, e.g., 5 U.S.C. 552 et seq.  Exemption 4 of the Freedom of Information Act provides an 

exemption for trade secrets and commercial or financial information obtained from a person and 

privileged or confidential.  See 5 U.S.C. 552(b)(4).  Exemption 8 of the Freedom of Information 

Act provides an exemption for matters that are contained in or related to examination, operating, or 

condition reports prepared by, on behalf of, or for the use of an agency responsible for the 

regulation or supervision of financial institutions.  See 5 U.S.C. 552(b)(8). 

729  This figure was calculated as follows: (Assistant General Counsel for 8 hours + 

Compliance Attorney for 6 hours) = 14 hours x 4 respondent CMSPs = 56 hours.  

730  This figure was calculated as follows: (Assistant General Counsel at $543/hour x 8 hours = 

$4,344) + (Compliance Attorney at $426/hour x 6 hours = $2,556) = $6,900 x 4 CMSPs equals 

$27,600.   



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Rule 17Ad-27 also imposes ongoing burdens on a respondent CMSP as follows: (i) 

ongoing monitoring and compliance activities with respect to the written policies and procedures 

required by the proposed rule; and (ii) ongoing documentation activities with respect to the 

required annual report.  As discussed in Part V.C.2, the Commission has modified the final rule to 

identify specific data elements to be included in the annual report.  To accommodate the 

documentation and reporting of such data as contemplated in final Rule 17Ad-27(b), the 

Commission has revised its estimates such that the ongoing activities required by Rule 17Ad-27 

would now impose an aggregate annual burden on respondent CMSPs of 148 hours,731 with an 

internal aggregate cost (or monetized value of the hour burden) of $65,208.732  The total industry 

internal cost is estimated to be $92,808.733 

Table 3.  Summary of burden estimates for Rule 17Ad-27.734 

                                                 
731  This figure was calculated as follows: (Compliance Attorney for 24 hours + Computer 

Operations Manager for 10 hours) = 34 hours x 4 respondent CMSPs = 136 hours.  In the T+1 

Proposing Release, the number of hours for a Compliance Attorney was incorrectly stated as “25 

hours” as opposed to “24 hours.”  See T+1 Proposing Release, supra note 2, at 10495 n.433.  As 

discussed previously, supra note 671, the Commission estimates that the Inline XBRL requirement 

will require respondent CMSPs to incur three additional ongoing burden hours to apply and review 

Inline XBRL tags, as follows: (Compliance Attorney for 3 hours) x 4 CMSPs = 12 hours.  Taken 

together, the total ongoing burden is 148 hours (136 hours + 12 hours = 148 hours).   

732  This figure was calculated as follows: (Compliance Attorney at $426/hour x 24 hours = 

$10,224) + (Computer Operations Manager at $514/hour x 10 hours = $5,140) = $15,364 x 4 

CMSPs = $61,456.  The Commission also estimates the costs associated with the three burden 

hours associated with applying and reviewing Inline XBRL tags are as follows: (Compliance 

Attorney at $426/hour x 3 hours = $1,278) x 4 CMSPs = $5,112.  Taken together, the total amount 

is $65,208 ($60,096 + $5,112 = $65,208). 

733  This figure was calculated as follows: $27,600 (industry one-time burden) + $65,208 

(industry ongoing burden) = $92,808.   

734  The T+1 Proposing Release incorrectly stated the amount for the total annual burden per 

respondent (91 hours) and the total annual industry burden (364 hours) because the initial burden 

used to calculate those amounts should have been annualized to 18.67 hours.  The estimates have 



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Name of 

Information 

Collection  

Type of 

Burden 

Number of 

Respondents 

Number of 

Annual 

Responses per 

Respondent 

Initial 

Burden Per 

Respondent 

Annualized 

Initial 

Burden per 

Respondent 

Ongoing 

Burden Per 

Respondent 

Total Annual 

Burden Per 

Respondent 

Total Annual 

Industry 

Burden 

17Ad-27 Recordkeeping 4 1 14735 4.67 37 41.67 166.67 

Total Aggregate Burden for All Respondents 166.67 hours 

 

C. Exchange Act Rule 15c6-2 

As proposed, Exchange Act Rule 15c6-2 did not create any PRA burdens, so the T+1 

Proposing Release did not estimate PRA burdens for the proposed rule.  As discussed in Part III.C, 

the Commission is modifying the proposed rule at adoption to incorporate affirmative 

recordkeeping obligations, as explained below. 

1. Summary and Proposed Use of Information 

Rule 15c6-2(a) requires any broker or dealer engaging in the allocation, confirmation, or 

affirmation process with another party or parties to achieve settlement of a securities transaction 

that is subject to the requirements of Rule 15c6-1(a) to either: (1) enter into a written agreement 

with the relevant parties to ensure completion of the allocation, confirmation, affirmation, or any 

combination thereof, for the transaction as soon as technologically practicable and no later than the 

end of the day on trade date in such form as necessary to achieve settlement of the transaction; or 

                                                 

been corrected in Table 3 for this adopting release and reflect the PRA estimates that the 

Commission provided to OMB for this rulemaking. 

735  In the T+1 Proposing Release, Table 2: Summary of burden estimates for Rule 17Ad-27 

erroneously stated the total industry initial burden of 56 hours instead of the initial burden per 

entity of 14 hours.  See T+1 Proposing Release, supra note 2, at 10496.  The remaining entries in 

the table in this release have been updated accordingly.Conformed to Federal Register version 

281 

(2) establish, maintain, and enforce written policies and procedures reasonably designed to ensure 

completion of the allocation, confirmation, affirmation, or any combination thereof, for the 

transaction as soon as technologically practicable and no later than the end of the day on trade date 

in such form as necessary to achieve settlement of the transaction.736 

Pursuant to Rule 15c6-2(b), to ensure completion of the allocation, confirmation, 

affirmation, or any combination thereof for the transaction as soon as technologically practicable 

and no later than the end of the day on trade date, written policies and procedures required by 

paragraph (a)(2) of this section shall: (1) identify and describe any technology systems, operations, 

and processes that the broker or dealer uses to coordinate with other relevant parties, including 

investment advisers and custodians, to ensure completion of the allocation, confirmation, or 

affirmation process for the transaction; (2) set target time frames on trade date for completing the 

allocation, confirmation, and affirmation for the transaction; (3) describe the procedures that the 

broker or dealer will follow to ensure the prompt communication of trade information, investigate 

any discrepancies in trade information, and adjust trade information to help ensure that the 

allocation, confirmation, and affirmation can be completed by the target time frames on trade date; 

(4) describe how the broker or dealer plans to identify and address delays if another party, 

including an investment adviser or a custodian, is not promptly completing the allocation or 

affirmation for the transaction, or if the broker or dealer experiences delays in promptly 

completing the confirmation; and (5) measure, monitor, document the rates of allocations, 

confirmations, and affirmations completed as soon as technologically practicable and no later than 

the end of the day on trade date.737 

                                                 
736  17 CFR 240.15c6-2(a). 

737  17 CFR 240.15c6-2(b). 



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The purpose of this information collection is to ensure that the parties to institutional 

transactions—that is, transactions where a broker-dealer or its customer must engage with agents 

of the customer, including the customer’s investment adviser or its securities custodian, to prepare 

a transaction for settlement—can ensure the completion of the allocation, confirmation, and 

affirmation process as soon as technologically practicable and no later than the end of the day on 

trade date.738  This objective, commonly referred to as “same-day affirmation,” has been a 

longstanding goal of the securities industry and one that can help ensure the timely and orderly 

settlement of securities transactions.739   

Rule 15c6-2 provides broker-dealers with two compliance alternatives that would create a 

recordkeeping burden: (i) entering into written agreements pursuant to Rule 15c6-2(a)(1) or (ii) 

establishing, maintaining, and enforcing written policies and procedures pursuant to Rule 15c6-

2(a)(2).  Based on the comments received regarding the costs and challenges associated with 

entering into such written agreements under the rule, the Commission believes that broker-dealers 

are unlikely to enter into new written agreements specifically for the purpose of achieving 

compliance with Rule 15c6-2(a)(1) if they do not already have written agreements to manage their 

commercial relationships.  Moreover, as discussed in Part III.B.5, a broker-dealer may choose to 

update existing agreements and commercial arrangements to achieve compliance with Rule 15c6-

2(a)(1);740 however, the Commission believes that broker-dealers are likely to choose to comply 

                                                 
738  See supra Part III. 

739  See id.; see also T+1 Proposing Release, supra note 2, at 10452–53.  

740  The existing requirements of 17 CFR 240.17a-4(b)(7) (“Rule 17a-4(b)(7)”) under the 

Exchange Act already require a broker or dealer to preserve all written agreements (or copies 

thereof) entered into by a member, broker or dealer relating to its business as such, including 

agreements with respect to any account.  See 17 CFR 240.17a-4(b)(7). 



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with the policies and procedures requirement under Rule 15c6-2(a)(2) if the costs and challenges 

(i.e., for PRA purposes, the associated hour burdens) associated with updating existing agreement 

or arrangements would be higher than those associated with the policies and procedures 

requirement.  For purposes of preparing this PRA analysis, the Commission assumes that all 

respondent broker-dealers will seek to achieve compliance with Rule 15c6-2 by establishing, 

maintaining, and enforcing policies and procedures consistent with Rule 15c6-2(a)(2).741 

2. Respondents 

As of December 31, 2021, 3,508 broker-dealers were registered with the Commission.742  

Of those, approximately 143 broker-dealers are participants of the DTC,743 a clearing agency 

registered with the Commission that provides central securities depository services for transactions 

in U.S. equity securities.  Participants in DTC can facilitate the settlement of securities transactions 

on behalf of their customers.  For example, broker-dealers that participate in DTC are often 

referred to as “clearing brokers” within the securities industry.  In addition to broker-dealers, DTC 

participants include bank custodians that may also hold securities on behalf of institutional 

customers.  Among other things, DTC facilitates the settlement of securities transactions using the 

delivery-versus-payment (“DVP”) and receipt-versus-payment (“RVP”) methods, both of which 

are commonly used by buyers and sellers to settle an institutional transaction once the parties have 

                                                 
741  To the extent some broker-dealers choose to update their existing agreements and 

arrangements to achieve compliance with Rule 15c6-2(a)(1) because the associated costs and 

challenges (i.e., for PRA purposes, the hour burdens) would be lower than those associated with 

the policies and procedures requirement, then the actual hour burden for this collection of 

information requirement in Rule 15c6-2 may be less than the estimated hour burden. 

742  This estimate is derived from FOCUS Report data as of December 31, 2021. 

743  See DTCC, DTC Member Directories, https://www.dtcc.com/client-center/dtc-directories 

(last updated Dec. 30, 2022).  

https://www.dtcc.com/client-center/dtc-directories


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completed the allocation, confirmation, and affirmation process.  Because DTC is the only clearing 

agency that provides central securities depository services for U.S. equities, the Commission 

believes that the set of participants at DTC that are broker-dealers are a useful, if partial, estimate 

of broker-dealers that participate in the allocation, confirmation, and affirmation process and 

therefore of broker-dealers that would be subject to the requirements of Rule 15c6-2. 

In addition, other broker-dealers may participate in the allocation, confirmation, and 

affirmation process but, because they do not maintain status as a participant in DTC, rely on 

commercial relationships with DTC participants (i.e., clearing brokers) to facilitate final settlement 

of their institutional transactions.  Using annual statistics compiled by the Financial Industry 

Regulatory Authority (“FINRA”), the Commission estimates that approximately 268 additional 

broker-dealers may serve institutional customers.744  Accordingly, the Commission estimates that 

approximately 411 broker-dealers would be subject to the requirements of Rule 15c6-2. 

3. Total Initial and Annual Reporting Burdens 

The extent to which a respondent will be burdened by the proposed collection of 

information under Rule 15c6-2 will depend on two factors: (1) the extent to which the broker-

dealer determines that its policies and procedures, as opposed to its written agreements, will be 

required to demonstrate compliance with the rule; and (2) the extent to which existing policies and 

procedures for ensuring timely settlement would need to be modified to address same-day 

affirmation.  As a general matter, most broker-dealers maintain policies and procedures to ensure 

                                                 
744  Specifically, statistics compiled by FINRA suggest that approximately 256 small firms and 

12 medium-sized firms in the “Trading and Execution” category perform “Institutional 

Brokerage.” FINRA, 2022 FINRA Industry Snapshot 33, 34 (2022), 

https://www.finra.org/sites/default/files/2022-03/2022-industry-snapshot.pdf. 

https://www.finra.org/sites/default/files/2022-03/2022-industry-snapshot.pdf


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the timely settlement of their transactions,745 and the securities industry considers achieving 

“same-day affirmation” an industry best practice.746  Nonetheless, the Commission believes that 

respondent broker-dealers will need to evaluate existing policies and procedures, identify any gaps, 

and then update their policies and procedures to address any gaps identified.  Accordingly, the 

Commission estimates that respondent broker-dealers would incur an aggregate one-time burden of 

approximately 240 hours to create policies and procedures required under the rule,747 and that the 

internal cost (or monetized value of the hour burden) of this one-time burden per broker-dealer 

would be $88,880.748   

Rule 15c6-2 also imposes ongoing burdens on a respondent broker-dealer as follows: (i) 

ongoing monitoring and compliance activities with respect to the written policies and procedures 

required by the rule; and (ii) ongoing documentation activities with respect to its obligations to 

measure, monitor, and document the rates of allocations, confirmations, and affirmations 

completed as soon as technologically practicable and no later than the end of the day on trade date.  

The Commission estimates that the ongoing activities required by Rule 15c6-2 would impose an 

                                                 
745  See, e.g., SIFMA August 26th Letter, supra note 207, at 2. 

746  See supra Part III.B.1. 

747  This figure was calculated as follows: (Assistant General Counsel for 20 hours + 

Compliance Attorney for 120 hours + Senior Risk Management Specialist for 20 hours + Risk 

Management Specialist for 80 hours) = 240 hours x 411 respondents = 98,640 hours.  

748  This figure was calculated as follows: (Assistant General Counsel at $543/hour x 20 hours 

= $10,860) + (Compliance Attorney at $426/hour x 120 hours = $51,120) + (Senior Risk 

Management Specialist at $417/hour x 20 hours = $8,340) + (Risk Management Specialist at 

$232/hour x 80 hours = $18,560) = $88,880 x 411 respondents = $36,529,680.   



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aggregate annual burden on respondent broker-dealers of 480 hours,749 and an internal cost (or 

monetized value of the hour burden) per broker-dealer of $172,416.750  The total industry internal 

cost is estimated to be approximately $107M.751 

Table 4.  Summary of burden estimates for Rule 15c6-2. 

Name of 

Information 

Collection  

Type of 

Burden 

Number of 

Respondents 

Number of 

Annual 

Responses per 

Respondent 

Initial 

Burden Per 

Respondent 

Annualized 

Initial 

Burden per 

Respondent 

Ongoing 

Burden Per 

Respondent 

Total Annual 

Burden Per 

Respondent 

Total Annual 

Industry 

Burden 

15c6-2 Recordkeeping 411 1 240 hours 80 480 hours 560 hours 230,160 hours 

Total Aggregate Burden for All Respondents 230,160 hours 

 

4. Collection of Information is Mandatory 

Where applicable, the collection of information pursuant to Rule 15c6-2 is mandatory. 

5. Confidentiality 

Where the Commission requests that a broker-dealer produce records retained pursuant to 

the requirements of Rule 15c6-2, a broker-dealer can request confidential treatment of the 

                                                 
749  This figure was calculated as follows: (Assistant General Counsel for 48 hours + 

Compliance Attorney for 192 hours + Senior Risk Management Specialist for 48 hours + Risk 

Management Specialist for 192 hours) = 480 hours x 411 respondents = 197,280 hours. 

750  This figure was calculated as follows: (Assistant General Counsel at $543/hour x 48 hours 

= $26,064) + (Compliance Attorney at $426/hour x 192 hours = $81,792) + (Senior Risk 

Management Specialist at $417/hour x 48 hours = $20,016) + (Risk Management Specialist at 

$232/hour x 192 hours = $44,544) = $172,416 x 411 respondents = $70,862,976.   

751  This figure was calculated as follows: $36,529,680 (industry one-time burden) + 

$70,862,976 (industry ongoing burden) = $107,392,656.   



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information.752  If such confidential treatment request is made, the Commission anticipates that it 

will keep the information confidential subject to applicable law.753 

6. Retention Period 

Pursuant to Exchange Act Rule 17a-4(b)(7), a broker or dealer registered pursuant to 

section 15 of the Exchange Act must preserve for a period of not less than three years, the first two 

years in an easily accessible place, all written agreements (or copies thereof) entered into by such 

member, broker or dealer relating to its business as such, including agreements with respect to any 

account.754 

Pursuant to 17 CFR 240.17a-4(e)(7), a broker or dealer registered pursuant to section 15 of 

the Exchange Act must maintain and preserve in an easily accessible place each compliance, 

supervisory, and procedures manual, including any updates, modifications, and revisions to the 

manual, describing the policies and practices of the member, broker or dealer with respect to 

compliance with applicable laws and rules, and supervision of the activities of each natural person 

associated with the member, broker or dealer until three years after the termination of the use of 

the manual.755 

                                                 
752  See 17 CFR 200.83. Information regarding requests for confidential treatment of 

information submitted to the Commission is available on the Commission’s website at 

http://www.sec.gov/foia/howfo2.htm#privacy. 

753  See, e.g., 5 U.S.C. 552 et seq.; 15 U.S.C. 78x (governing the public availability of 

information obtained by the Commission). 

754  17 CFR 240.17a-4(b)(7). 

755  17 CFR 240.17a-4(e)(7). 

http://www.sec.gov/foia/howfo2.htm#privacy


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X. Regulatory Flexibility Act 

The Regulatory Flexibility Act (“RFA”) requires the Commission, in promulgating rules, to 

consider the impact of those rules on small entities.756  Section 603(a) of the Administrative 

Procedure Act,757 as amended by the RFA, generally requires the Commission to undertake a 

regulatory flexibility analysis of all proposed rules to determine the impact of such rulemaking on 

“small entities.”758  Section 605(b) of the RFA states that this requirement shall not apply to any 

proposed rule which, if adopted, would not have a significant economic impact on a substantial 

number of small entities.759  An Initial Regulatory Flexibility Analysis (“IRFA”) was prepared in 

conjunction with the T+1 Proposing Release, published in February 2022.  The T+1 Proposing 

Release included, and solicited comment on, the IRFA. 

A. Exchange Act Rules 15c6-1 and 15c6-2 

Below is the Final Regulatory Flexibility Analysis for the amendments to Rule 15c6-1 and 

new Rule 15c6-2, prepared in accordance with the RFA.   

1. Need for the Rules 

The Commission is adopting the amendments to Rule 15c6-1 to shorten the standard 

settlement cycle from two days to one day, offering market participants benefits that include 

                                                 
756  See 5 U.S.C. 601 et seq. 

757  5 U.S.C. 603(a). 

758  Section 601(b) of the RFA permits agencies to formulate their own definitions of “small 

entities.”  See 5 U.S.C. 601(b).  The Commission has adopted definitions for the term “small 

entity” for the purposes of rulemaking in accordance with the RFA.  These definitions, as relevant 

to this rulemaking, are set forth in 17 CFR 240.0-10. 

759  See 5 U.S.C. 605(b). 



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reduced exposure to credit, market, and liquidity risk, as well as related reductions to overall 

systemic risk.  These benefits have been previously discussed in detail in Parts II and VIII above.   

The Commission is adopting Rule 15c6-2 to establish requirements that facilitate the 

completion of allocations, confirmations, and affirmations by the end of the trade date, helping to 

facilitate the settlement of institutional transactions in a T+1 or shorter standard settlement cycle 

by promoting the timely and orderly transmission of trade data necessary to achieve settlement.  In 

addition, Rule 15c6-2 can foster continued improvements in institutional trade processing, which 

should in turn also further promote accuracy and efficiency, reduce the potential for settlement 

fails, and more generally, reduce the potential for operational risk.  These benefits have been 

previously discussed in detail in Parts III and VIII above.  

The amendments to Rule 15c6-1 and new Rule 15c6-2 each advance the objectives of 

section 15(c)(6), 17A, and 23(a) of the Exchange Act.760 

2. Summary of Significant Issues Raised by Public Comment 

As noted above in Part X.A, the T+1 Proposing Release solicited comment on the IRFA.  

Although the Commission received no comments specifically concerning the IRFA, multiple 

commenters discussed the costs and burdens for broker-dealers associated with Rules 15c6-1 and 

15c6-2.  These comments have been discussed in detail in Parts II and III, and the Commission has 

modified the proposed rules at adoption to address these comments and, in part, to minimize the 

effect on small entities, as discussed further in Part X.A.5 below. 

3. Description and Estimate of Small Entities 

Paragraph (c) of Rule 0-10 under the Exchange Act provides that, for purposes of 

Commission rulemaking in accordance with the provisions of the RFA, when used with reference 

                                                 
760  See 15 U.S.C. 78o(c)(6); 15 U.S.C. 78q-1; 15 U.S.C. 78w(a).  



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to a broker or dealer, the Commission has defined the term “small entity” to mean a broker or 

dealer: (1) with total capital (net worth plus subordinated liabilities) of less than $500,000 on the 

date in the prior fiscal year as of which its audited financial statements were prepared pursuant to 

Rule 17a-5(d) under the Exchange Act,761 or if not required to file such statements, a broker-dealer 

with total capital (net worth plus subordinated liabilities) of less than $500,000 on the last business 

day of the preceding fiscal year (or in the time that it has been in business, if shorter); and (2) is 

not affiliated with any person (other than a natural person) that is not a small business or small 

organization.762   

The amendments to Rule 15c6-1 and new Rule 15c6-2 each establish requirements that 

apply to broker-dealers, including those that are small entities.  Based on FOCUS Report data, the 

Commission estimates that, as of June 30, 2022, approximately 1,393 broker-dealers might be 

deemed small entities for purposes of this analysis. 

4. Projected Reporting, Recordkeeping, and Other Compliance Requirements 

The amendments to Rule 15c6-1 do not impose any new reporting or recordkeeping 

requirements on broker-dealers that are small entities.  However, the amendments to Rule 15c6-1 

may impact certain broker-dealers, including those that are small entities, to the extent that broker-

dealers may need to make changes to their business operations and incur certain costs in order to 

operate in a T+1 environment.   

For example, implementing a T+1 standard settlement cycle may require broker-dealers, 

including those that are small entities, to make changes to their business practices, as well as to 

                                                 
761  17 CFR 240.17a-5(c). 

762  17 CFR 240.0-10(d). 



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their computer systems, and/or to deploy new technology solutions.  Implementation of these 

changes may require broker-dealers to incur new or increased costs, which may vary based on the 

business model of individual broker-dealers as well as other factors.763 

Additionally, implementing a T+1 standard settlement cycle may result in an increase in 

costs to certain broker-dealers who finance the purchase of customer securities until the broker-

dealer receives payment from its customers.  To pay for securities purchases, many customers 

liquidate other securities or money fund balances held for them by their broker-dealers in 

consolidated accounts such as cash management accounts.  However, some broker-dealers may 

elect to finance the purchase of customer securities until the broker-dealer receives payment from 

its customers for those customers that do not choose to liquidate other securities or have a 

sufficient money fund balance prior to trade execution to pay for securities purchases.  Broker-

dealers that elect to finance the purchase of customer securities may incur an increase in costs in a 

T+1 environment resulting from settlement occurring one day earlier unless the broker-dealer can 

expedite customer payments. 

Comments directed to the burdens and costs associated with Rule 15c6-1 have been 

discussed in Part II. 

As modified at adoption and as previously discussed in detail in Part III, Rule 15c6-2 

imposes recordkeeping requirements on broker-dealers that are small entities because it includes a 

requirement to establish, maintain, and enforce written policies and procedures reasonably 

designed to ensure the completion on trade of trade allocations, confirmations, and affirmations for 

their institutional trades.  In addition, the rule may impact certain broker-dealers, including those 

                                                 
763  See supra Part VIII.C.2 (further discussing how large customers of third-party providers 

have market power that may enable them to avoid internalizing costs, while small customers in a 

weaker negotiating position relative to their service providers may bear the bulk of these costs). 



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that are small entities, to the extent that broker-dealers may need to make changes to their business 

operations and incur certain costs in order to implement such policies and procedures.  These 

efforts may require broker-dealers, including those that are small entities, to make changes to their 

business practices, as well as to their computer systems, and/or to deploy new technology 

solutions.  Implementation of these changes may require broker-dealers to incur new or increased 

costs, which may vary based on the business model of individual broker-dealers as well as other 

factors. 

Comments directed to the burdens and costs associated with Rule 15c6-2 have been 

discussed in Part III. 

5. Description of Commission Actions to Minimize Effect on Small Entities 

As discussed in the IRFA, the Commission considered alternatives to the amendments to 

Rule 15c6-1 that would accomplish the stated objectives of the amendment without 

disproportionately burdening broker-dealers that are small entities, including: differing compliance 

requirements or timetables; clarifying, consolidating, or simplifying the compliance requirements; 

using performance rather than design standards; or providing an exemption for certain or all 

broker-dealers that are small entities.  The purpose of Rule 15c6-1 is to establish a standard 

settlement cycle for broker-dealer transactions.  Alternatives, such as different compliance 

requirements or timetables, or exemptions, for Rule 15c6-1, or any part thereof, for small entities 

would undermine the purpose of establishing a standard settlement cycle.  For example, allowing 

small entities to settle at a time later than T+1 could create a two-tiered market that could work to 

the detriment of small entities whose order flow would not coincide with that of other firms 

operating on a T+1 settlement cycle.  Additionally, the Commission believes that establishing a 

single timetable (i.e., compliance date) for all broker-dealers, including small entities, to comply 

with the amendment is necessary to ensure that the transition to a T+1 standard settlement cycle 



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takes place in an orderly manner that minimizes undue disruptions in the securities markets.764  

With respect to using performance rather than design standards, the Commission used performance 

standards to the extent appropriate under the statute.765  In addition, under the amendment, broker-

dealers have the flexibility to tailor their systems and processes, and generally to choose how, to 

comply with the rule. 

The Commission also considered alternatives to Rule 15c6-2 and, in response to the 

comments received, has modified the rule at adoption to provide a policies and procedures 

alternative, as requested by the commenters, to reduce the burden and cost of the rule and to 

provide greater flexibility to broker-dealers to tailor their systems and processes, and generally to 

choose how, to comply with the rule.  The modifications to the rule made in response to the 

comments received have been discussed in detail in Part III.C. 

B. Amendment to Advisers Act Rule 204-2 

The Commission has prepared the following Final Regulatory Flexibility Analysis 

(“FRFA”) in accordance with section 4(a) of the RFA relating to the final amendments to Rule 

204-2 under the Advisers Act.  

1. Need for the Rule Amendment 

                                                 
764  For example, because broker-dealers do not always know the identity of their counterparty 

when they enter a transaction, providing broker-dealers that are small entities with an exemption 

from the standard settlement cycle would likely create substantial confusion over when a 

transaction will settle. 

765  For example, for firm commitment offerings, the Commission modified the proposed rule 

at adoption to incorporate a T+2 rather than a T+1 standard, as discussed above in Part II.C.4.  

More generally, small entities retain the option under paragraph (d) to agree with their 

counterparty in advance of a transaction subject to Rule 15c6-1(a) to use a settlement cycle other 

than T+1.  See supra Part II.C.5. 



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As discussed above, we are adopting amendments to 17 CFR 275.206(4)-2 (“Rule 206(4)-

2”) to require all registered investment advisers to make and keep certain records for any 

transaction that is subject to the requirements of Rule 15c6-2(a). Those records include each 

confirmation received, and any allocation and each affirmation sent or received, with a date and 

time stamp for each allocation and affirmation that indicates when the allocation and affirmation 

was sent or received.  The reasons for, and objectives of, the final amendments are discussed in 

more detail in Parts I and IV above. The burdens of these requirements on small advisers are 

discussed in Parts VIII and IX, which discuss the burdens on all advisers. The professional skills 

required to meet these specific burdens are also discussed in Part IX. 

2. Summary of Significant Issues Raised by Public Comment 

In developing our approach to Rule 204-2, we considered the potential impact on small 

entities that would be subject to the final amendments.  In the 2022 Proposing Release, we 

requested comment on the matters discussed in the IRFA, including the proposed amendments to 

Rule 204-2, as well as the potential impacts discussed in this analysis, and whether the proposal 

could have an effect on small entities that has not been considered.  One commenter, concerned 

that the Commission had underestimated the time and cost burdens for implementing the proposed 

recordkeeping requirements, observed that if investment advisers that currently rely on third 

parties to meet their recordkeeping obligations were no longer be able to do so, and would instead 

have to obtain and maintain such records on an ongoing basis, advisers, “especially smaller and 

mid-sized investment advisers,” would incur costs to update their infrastructure to obtain and 

maintain the proposed trading records.766  This commenter recommended that the Commission 

                                                 
766  IAA April Letter, supra note 16, at 7. 



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update its estimates, and specifically requested “that the Commission review the potential cost 

savings from allowing investment advisers to utilize third parties to maintain required records 

under the Proposal.”767  

As discussed above, advisers may continue to rely on third parties to comply with their 

recordkeeping obligations, consistent with current practice, and we do not believe that the final 

amendments to Rule 204-2 will require most advisers to make significant changes to their current 

recordkeeping practices.  We recognize that the amendments to final Rule 204-2 will require 

registered investment advisers to make and keep records of confirmations received, and any 

allocations and each affirmation sent or received for securities transactions that are subject to the 

requirements of Rule 15c6-2(a).  Some advisers—including small advisers—may need to update 

their processes to retain and date stamp the specified records.  After consideration of the comments 

received, we are revising our estimates to increase the number of small entities affected by the new 

rule and amendments, update the estimated wage rates, and increase the hourly burdens associated 

with the amendments to Rule 204-2. 

3. Description and Estimate of Small Entities 

The final amendments will affect certain investment advisers registered with the 

Commission, including some small entities. Under Commission rules, for the purposes of the 

Advisers Act and the RFA, an investment adviser generally is a small entity if it: (1) has assets 

under management having a total value of less than $25 million; (2) did not have total assets of $5 

million or more on the last day of the most recent fiscal year; and (3) does not control, is not 

controlled by, and is not under common control with another investment adviser that has assets 

                                                 
767  Id. 



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under management of $25 million or more, or any person (other than a natural person) that had 

total assets of $5 million or more on the last day of its most recent fiscal year.768   

As discussed in Part IX.A, the Commission estimates that as of June 2022, 12,991 

registered investment advisers will be subject to the final amendments to Rule 204-2 under the 

Advisers Act.  Based on IARD data, we estimate that, as of June 2022, approximately 522 SEC-

registered advisers are small entities (“small advisers”).769  Of these, the Commission anticipates 

that 33, or 6% of small advisers registered with the Commission, would be subject to the final 

amendment under the Advisers Act.770  

4. Projected Reporting, Recordkeeping, and Other Compliance Requirements 

The final amendments to Rule 204-2 will require all registered investment advisers to 

maintain make and keep certain records with respect to any securities transaction that is subject to 

                                                 
768  Advisers Act Rule 0-7(a). 

769  Based on SEC-registered investment adviser responses to Items 5.F. and 12 of Form ADV 

as of June 2022, incorporating Form ADV filings received through IARD through August 31, 

2022. Only SEC-registered investment advisers with regulatory assets under management 

(“RAUM”) of less than $25 million, as indicated in Form ADV Item 5.F.(2)(c) are required to 

respond to Form ADV Item 12. For purposes of this analysis, a registered investment adviser is 

classified as a “small business” or “small organization” if they respond “No” to Form ADV Item 

12.A., 12.B.(1), 12.B.(2), 12.C.(1), and 12.C.(2). These responses indicate that the registered 

investment adviser had RAUM of less than $25 million, did not have total assets of $5 million or 

more on the last day of the most recent fiscal year; and does not control, is not controlled by, and is 

not under common control with another investment adviser that has RAUM of $25 million or 

more, or any person (other than a natural person) that had total assets of $5 million or more on the 

last day of the most recent fiscal year, consistent with the definition of a small entity under the 

Advisers Act for purposes of the RFA. 

770  Based on data from Form ADV as of June 2022. This figure represents small registered 

investment advisers that: (i) report clients that are only individuals or high net worth individuals in 

response to Item 5.D, and (ii) do not report participating in wrap fee programs in response to Item 

5.I, and (iii) have regulatory assets under management greater than zero in response to Item 5.D. 



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the requirements of Rule 15c6-2(a). These records include each confirmation received, and any 

allocation and each affirmation sent or received, with a date and time stamp for each allocation and 

affirmation that indicates when the allocation and affirmation were sent or received.  Each of these 

records will be required to be kept in the same manner, and for the same period of time, as other 

books and records required to be kept under Rule 204-2(a).771  The PRA for Rule 204-2 discusses 

the type of professional skills necessary to conduct such activities.  The Commission believes that 

no Federal rules duplicate, overlap or conflict with the final amendments to Rule 204-2.  As 

discussed above, there are approximately 33 small advisers currently registered with us that we 

believe will impacted by the rule. As discussed in our Paperwork Reduction Act Analysis, the 

amendments to Rule 204-2 under the Advisers Act will increase the annual burden by 

approximately three hours per adviser, or 99 incremental aggregate hours for small advisers. We 

therefore believe the annual monetized aggregate cost to small advisers associated with our 

amendments will be 7,673.772 

5. Description of Commission Actions to Minimize Effect on Small Entities 

The RFA directs the Commission to consider significant alternatives that would accomplish 

our stated objective, while minimizing any significant economic impact on small entities. The 

Commission considered alternatives to the final amendments to Rule 204-2 that would accomplish 

the stated objectives without disproportionately burdening investment advisers that are small 

entities, including: (1) differing compliance or reporting requirements or timetables that take into 

account the resources available to small entities; (2) clarifying, consolidating or simplifying the 

compliance and reporting requirements; (3) using performance rather than design standards; or (4) 

                                                 
771  See, e.g., Advisers Act Rule 204-2(e)–(g). 

772  Calculated as follows: (3 hours x 33 small advisers) x $77.5 per burden hour = $7,673. 



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providing an exemption from coverage of all or part of the final rule amendments for investment 

advisers that are small entities.  

Regarding the first and fourth alternatives, the Commission believes that establishing 

different compliance, recordkeeping, or reporting requirements or timetables for small advisers, or 

exempting small advisers from the amended rule, or any part thereof, would be inappropriate under 

these circumstances. The protections of the Advisers Act are intended to apply equally to clients of 

both large and small firms and small entities currently follow the same requirements that large 

entities do when making and keeping books and records; therefore, it would be inconsistent with 

the purposes of the Advisers Act to specify differences for small entities under the final 

amendments to Rule 204-2. While the Commission estimates that 33 small advisers will incur 

costs to comply with the amendments, the Commission believes that the initial burden on small 

advisers of retaining the required records will not be large. As discussed above, the Commission 

believes that many advisers, including small advisers, already have processes in place to retain 

records of confirmations received, and allocations and affirmations sent and received as part of 

their customary and usual business practices, though some advisers do not currently retain these 

records and some still maintain certain records in paper and/or communicate by telephone. The 

Commission also believes many such records are electronically maintained, and are sent or 

received electronically, in which case such documents are already date and time stamped in many 

instances. As a result, the Commission does not believe the two hour additional burden of 

complying with the final amendments would warrant establishing a different timetable for 

compliance for small advisers. In addition, as discussed above, our staff would use the information 

that advisers would maintain to help prepare for examinations of investment advisers and verify 

that an adviser has completed the steps necessary to complete settlement in a timely manner in 



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accordance with final Rule 15c6-1(a). Establishing different conditions for large and small advisers 

would negate these benefits.  

Similarly, we do not believe it would be appropriate to exempt small advisers from the 

final amendments. We believe that 33 small advisers will be subject to amended Rule 204-2 and 

thus make and keep records of each confirmation received, and any allocation and each affirmation 

sent or received, with a date and time stamp for each allocation and affirmation that indicates when 

the allocation and affirmation were sent or received.  This approach is designed to support the 

Commission’s policy objectives in achieving same-day affirmation by helping to ensure that trades 

with advisers timely settle on T+1.  In addition, this requirement will help advisers research and 

remediate issues that may cause delays in the issuance of allocations and affirmations and improve 

their timeliness overall.  Requiring these records also will help advisers establish that they have 

timely met contractual obligations, if applicable, or any requirements broker-dealers impose in 

light of their compliance obligations under final Rule 15c6-2(a).   

Regarding the second alternative, the Commission believes the final amendments are clear 

and that further clarification, consolidation, or simplification of the compliance requirements is not 

necessary. Amended Rule 204-2 states the types of communications – confirmations, any 

allocations, and affirmations – that advisers must retain in their records, and that each allocation 

and affirmation must be date and time stamped. We believe that by clearly listing these types of 

communications as required records, advisers will not need to parse whether, and if so which, 

current requirement under Rule 204-2 captures these post-trade communications. Further, the 

requirement to date and time stamp each allocation and affirmation sent to a broker or dealer is 

clear and consistent with many advisers’ current practices of date and time stamping these records.  



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Regarding the third alternative, the final amendments to Rule 204-2 use a combination of 

performance and design standards. The final Rule 204-2 amendments are narrowly tailored to 

correspond to the final rules and rule amendments under the Exchange Act.  Although the 

amendments provide some flexibility to advisers in such practices as date- and time-stamping, we 

generally find that it is more useful to our regulatory and examination program, and therefore for 

our ability to protect investors, for advisers to retain books and records in a uniform and 

quantifiable manner.  

C. Exchange Act Rule 17Ad-27 

Exchange Act Rule 17Ad-27 applies to clearing agencies that are CMSPs.  For the 

purposes of Commission rulemaking, a small entity includes, when used with reference to a 

clearing agency, a clearing agency that (i) compared, cleared, and settled less than $500 million in 

securities transactions during the preceding fiscal year, (ii) had less than $200 million of funds and 

securities in its custody or control at all times during the preceding fiscal year (or at any time that it 

has been in business, if shorter), and (iii) is not affiliated with any person (other than a natural 

person) that is not a small business or small organization.773 

As discussed in the T+1 Proposing Release, and based on the Commission’s existing 

information about the CMSPs that would be subject to Rule 17Ad-27, the Commission continues 

to believe that all such CMSPs would not fall within the definition of a small entity described 

above.774  While other CMSPs may emerge and seek to register as clearing agencies or obtain 

                                                 
773  See 17 CFR 240.0-10(d). 

774  DTCC ITP Matching is a subsidiary of DTCC, and in 2020, DTCC processed $2.329 

quadrillion in financial transactions.  DTCC, 2020 Annual Report.  As of December 1, 2021, 

SS&C Technologies Holdings, Inc. (NASDAQ: SSNC) had a market capitalization of $19.35 

billion.  Bloomberg STP LLC is a wholly-owned by Bloomberg L.P., a global business and 

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exemptions from registration as a clearing agency with the Commission, the Commission does not 

believe that any such entities would be “small entities” as defined in 17 CFR 240.0-10(d).  

Accordingly, the Commission believes that any such CMSP would exceed the thresholds for 

“small entities” set forth in in 17 CFR 240.0-10.   

The Commission received no comments regarding its analysis for Rule 17Ad-27 in the T+1 

Proposing Release.  For the reasons described above, the Commission certifies that Rule 17Ad-27 

will not have a significant economic impact on a substantial number of small entities. 

XI. Other Matters 

If any of the provisions of these rules, or the application thereof to any person or 

circumstance, is held to be invalid, such invalidity shall not affect other provisions or application 

of such provisions to other persons or circumstances that can be given effect without the invalid 

provision or application.  

Pursuant to the Congressional Review Act,775 the Office of Information and Regulatory 

Affairs has designated these rules as a “major rule,” as defined by 5 U.S.C. 804(2). 

Statutory Authority 

The Commission is adopting amendments to Regulation S-T and Rule 15c6-1 and adopting 

new Rules 15c6-2 and 17Ad-27 under the Commission’s rulemaking authority set forth in sections 

15(c)(6), 17A, 23(a), and 35A of the Exchange Act [15 U.S.C. 78o(c)(6), 78q-1, 78w(a), and 78ll, 

respectively].  The Commission is adopting amendments to Rule 204-2 under the Advisers Act 

under the authority set forth in sections 204 and 211 of the Advisers Act [15 U.S.C. 80b-

4 and 80b-11]. 

List of Subjects in 17 CFR Parts 232, 240, and 275 

                                                 
775  5 U.S.C. 801 et seq. 



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Reporting and recordkeeping requirements, Securities. 

Text of Amendment 

In accordance with the foregoing, title 17, chapter II of the Code of Federal Regulations is 

amended as follows: 

PART 232— REGULATION S-T—GENERAL RULES AND REGULATIONS FOR 

ELECTRONIC FILINGS 

1. The general authority citation for part 232 continues to read as follows:  

Authority: 15 U.S.C. 77c, 77f, 77g, 77h, 77j, 77s(a), 77z-3, 77sss(a), 78c(b), 78l, 78m, 

78n, 78o(d), 78w(a), 78ll, 80a-6(c), 80a-8, 80a-29, 80a-30, 80a-37, 80b-4, 80b-6a, 80b-10, 80b-11, 

7201 et seq.; and 18 U.S.C. 1350, unless otherwise noted. 

*  *   *   *  * 

2.  Amend § 232.101 by: 

a. Removing the word “and” at the end of paragraph (a)(1)(xxix); 

b. Removing the period at the end of paragraph (a)(1)(xxx) and adding “; and” in its 

place; and  

c. Adding paragraph (a)(1)(xxxi).  

The addition reads as follows: 

§ 232.101 Mandated electronic submissions and exceptions. 

(a) * * * 

(1) * * * 

(xxxi) Reports filed pursuant to § 240.17Ad-27 of this chapter (Rule 17Ad-27 under the 

Exchange Act).  

*  *   *   *  * 



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3. Amend §232.405 by: 

a. Revising the introductory text and paragraphs (a)(2), (a)(3)(i) introductory text, (a)(3)(ii), 

and (a)(4), and (b)(1) introductory text; 

b. Adding paragraph (b)(5); and 

c. Revising Note 1 to § 232.405. 

The addition and revisions read as follows: 

§232.405 Interactive Data File submissions. 

This section applies to electronic filers that submit Interactive Data Files. Section 

229.601(b)(101) of this chapter (Item 601(b)(101) of Regulation S-K), General Instruction F of 

Form 11-K (§ 249.311), paragraph (101) of Part II—Information Not Required to be Delivered to 

Offerees or Purchasers of Form F-10 (§ 239.40 of this chapter), paragraph 101 of the Instructions 

as to Exhibits of Form 20-F (§ 249.220f of this chapter), paragraph B.(15) of the General 

Instructions to Form 40-F (§ 249.240f of this chapter), paragraph C.(6) of the General Instructions 

to Form 6-K (§ 249.306 of this chapter), § 240.17Ad-27(d) of this chapter (Rule 17Ad-27(d) under 

the Exchange Act), Note D.5 of § 240.14a-101 of this chapter (Rule 14a-101 under the Exchange 

Act), Item 1 of § 240.14c-101 of this chapter (Rule 14c-101 under the Exchange Act), General 

Instruction C.3.(g) of Form N-1A (§§ 239.15A and 274.11A of this chapter), General Instruction I 

of Form N-2 (§§ 239.14 and 274.11a-1 of this chapter), General Instruction C.3.(h) of Form N-3 

(§§ 239.17a and 274.11b of this chapter), General Instruction C.3.(h) of Form N-4 (§§ 239.17b and 

274.11c of this chapter), General Instruction C.3.(h) of Form N-6 (§§ 239.17c and 274.11d of this 

chapter), and General Instruction C.4 of Form N-CSR (§§ 249.331 and 274.128 of this chapter) 

specify when electronic filers are required or permitted to submit an Interactive Data File 

(§ 232.11), as further described in note 1 to this section. This section imposes content, format and 



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submission requirements for an Interactive Data File, but does not change the substantive content 

requirements for the financial and other disclosures in the Related Official Filing (§ 232.11). 

(a) * * * 

(2) Be submitted only by an electronic filer either required or permitted to submit an 

Interactive Data File as specified by Item 601(b)(101) of Regulation S-K, General Instruction F of 

Form 11-K (§ 249.311), paragraph (101) of Part II—Information Not Required to be Delivered to 

Offerees or Purchasers of Form F-10 (§ 239.40 of this chapter), paragraph 101 of the Instructions 

as to Exhibits of Form 20-F (§ 249.220f of this chapter), paragraph B.(15) of the General 

Instructions to Form 40-F (§ 249.240f of this chapter), paragraph C.(6) of the General Instructions 

to Form 6-K (§ 249.306 of this chapter), Rule 17Ad-27(d) under the Exchange Act, Note D.5 of 

Rule 14a-101 under the Exchange Act, Item 1 of Rule 14c-101 under the Exchange Act, General 

Instruction C.3.(g) of Form N1A (§§ 239.15A and 274.11A of this chapter), General Instruction I 

of Form N-2 (§§ 239.14 and 274.11a-1 of this chapter), General Instruction C.3.(h) of Form N-3 

(§§ 239.17a and 274.11b of this chapter), General Instruction C.3.(h) of Form N-4 (§§ 239.17b and 

274.11c of this chapter), General Instruction C.3.(h) of Form N-6 (§§ 239.17c and 274.11d of this 

chapter), or General Instruction C.4 of Form N-CSR (§§ 249.331 and 274.128 of this chapter), as 

applicable; 

(3) * * * 

(i) If the electronic filer is not a management investment company registered under the 

Investment Company Act of 1940 (15 U.S.C. 80a et seq.), or a separate account as defined in 

section 2(a)(14) of the Securities Act (15 U.S.C. 77b(a)(14)) registered under the Investment 

Company Act of 1940, or a business development company as defined in section 2(a)(48) of the 

Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(48)), or a clearing agency that provides a 



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central matching service, and is not within one of the categories specified in paragraph (f)(1)(i) of 

this section, as partly embedded into a filing with the remainder simultaneously submitted as an 

exhibit to:  

* * * 

(ii) If the electronic filer is a management investment company registered under the 

Investment Company Act of 1940 (15 U.S.C. 80a et seq.), or a separate account (as defined in 

section 2(a)(14) of the Securities Act (15 U.S.C. 77b(a)(14)) registered under the Investment 

Company Act of 1940, or a business development company as defined in section 2(a)(48) of the 

Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(48)), or a clearing agency that provides a 

central matching service, and is not within one of the categories specified in paragraph (f)(1)(ii) of 

this section, as partly embedded into a filing with the remainder simultaneously submitted as an 

exhibit to a filing that contains the disclosure this section requires to be tagged; and 

(4) Be submitted in accordance with the EDGAR Filer Manual and, as applicable, Item 

601(b)(101) of Regulation S-K, General Instruction F of Form 11-K (§ 249.311 of this chapter), 

paragraph (101) of Part II—Information Not Required to be Delivered to Offerees or Purchasers of 

Form F-10 (§ 239.40 of this chapter), paragraph 101 of the Instructions as to Exhibits of Form 20-F 

(§ 249.220f of this chapter), paragraph B.(15) of the General Instructions to Form 40-F (§ 249.240f 

of this chapter), paragraph C.(6) of the General Instructions to Form 6-K (§ 249.306 of this 

chapter), Rule 17Ad-27(d) under the Exchange Act, Note D.5 of Rule 14a-101 under the Exchange 

Act, Item 1 of Rule 14c-101 under the Exchange Act, General Instruction C.3.(g) of Form N-1A 

(§§ 239.15A and 274.11A of this chapter), General Instruction I of Form N-2 (§§ 239.14 and 

274.11a-1 of this chapter), General Instruction C.3.(h) of Form N-3 (§§ 239.17a and 274.11b of 

this chapter), General Instruction C.3.(h) of Form N-4 (§§ 239.17b and 274.11c of this chapter), 



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General Instruction C.3.(h) of Form N-6 (§§ 239.17c and 274.11d of this chapter); or General 

Instruction C.4 of Form N-CSR (§§ 249.331 and 274.128 of this chapter). 

(b) * * * 

(1) If the electronic filer is not a management investment company registered under the 

Investment Company Act of 1940 (15 U.S.C. 80a et seq.), or a separate account (as defined in 

section 2(a)(14) of the Securities Act (15 U.S.C. 77b(a)(14)) registered under the Investment 

Company Act of 1940, or a business development company as defined in section 2(a)(48) of the 

Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(48)), or a clearing agency that provides a 

central matching service, an Interactive Data File must consist of only a complete set of 

information for all periods required to be presented in the corresponding data in the Related 

Official Filing, no more and no less, from all of the following categories: 

 * * * * * 

(5) If the electronic filer is a clearing agency that provides a central matching service, an 

Interactive Data File must consist only of a complete set of information for all corresponding data 

in the Related Official Filing, no more and no less, as follows: 

(i) The information provided pursuant to (Rule 17Ad-27 under the Exchange Act). 

(ii) [Reserved] 

* * * * * 

Note 1 to § 232.405: Item 601(b)(101) of Regulation S-K specifies the circumstances under 

which an Interactive Data File must be submitted and the circumstances under which it is 

permitted to be submitted, with respect to §§ 239.11 (Form S-1), 239.13 (Form S-3), 239.25 (Form 

S-4), 239.18 (Form S-11), 239.31 (Form F-1), 239.33 (Form F-3), 239.34 (Form F-4), 249.310 

(Form 10-K), 249.308a (Form 10-Q), and 249.308 of this chapter (Form 8-K). General Instruction 



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F of Form 11-K (§ 249.311 of this chapter) specifies the circumstances under which an Interactive 

Data File must be submitted, and the circumstances under which it is permitted to be submitted, 

with respect to Form 11-K. Paragraph (101) of Part II—Information not Required to be Delivered 

to Offerees or Purchasers of Form F-10 (§ 239.40 of this chapter) specifies the circumstances 

under which an Interactive Data File must be submitted and the circumstances under which it is 

permitted to be submitted, with respect to Form F-10. Paragraph 101 of the Instructions as to 

Exhibits of Form 20-F (§ 249.220f of this chapter) specifies the circumstances under which an 

Interactive Data File must be submitted and the circumstances under which it is permitted to be 

submitted, with respect to Form 20-F. Paragraph B.(15) of the General Instructions to Form 40-F 

(§ 249.240f of this chapter) and Paragraph C.(6) of the General Instructions to Form 6-K 

(§ 249.306 of this chapter) specify the circumstances under which an Interactive Data File must be 

submitted and the circumstances under which it is permitted to be submitted, with respect to 

§§ 249.240f (Form 40-F) and 249.306 of this chapter (Form 6-K). Rule 17Ad-27(d) under the 

Exchange Act specifies the circumstances under which an Interactive Data File must be submitted 

with respect the reports required under Rule 17Ad-27. Note D.5 of Schedule 14A (§ 240.14a-101 

of this chapter) and Item 1 of Schedule 14C (§ 240.14c-101 of this chapter) specify the 

circumstances under which an Interactive Data File must be submitted with respect to Schedules 

14A and 14C. Item 601(b)(101) of Regulation S-K, paragraph (101) of Part II—Information not 

Required to be Delivered to Offerees or Purchasers of Form F-10, Instructions to Form 40-F, and 

paragraph C.(6) of the General Instructions to Form 6-K all prohibit submission of an Interactive 

Data File by an issuer that prepares its financial statements in accordance with 17 CFR 210.6-01 

through 210.6-10 (Article 6 of Regulation S-X). For an issuer that is a management investment 

company or separate account registered under the Investment Company Act of 1940 (15 U.S.C. 



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80a et seq.) or a business development company as defined in section 2(a)(48) of the Investment 

Company Act of 1940 (15 U.S.C. 80a2(a)(48)), General Instruction C.3.(g) of Form N-1A 

(§§ 239.15A and 274.11A of this chapter), General Instruction I of Form N-2 (§§ 239.14 and 

274.11a-1 of this chapter), General Instruction C.3.(h) of Form N-3 (§§ 239.17a and 274.11b of 

this chapter), General Instruction C.3.(h) of Form N-4 (§§ 239.17b and 274.11c of this chapter), 

General Instruction C.3.(h) of Form N-6 (§§ 239.17c and 274.11d of this chapter), and General 

Instruction C.4 of Form N-CSR (§§ 249.331 and 274.128 of this chapter), as applicable, specifies 

the circumstances under which an Interactive Data File must be submitted. 

 

PART 240—GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT 

OF 1934 

4.   The general authority citation for part 240 continues to read as follows: 

Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 77eee, 77ggg, 77nnn, 77sss, 

77ttt, 78c, 78c-3, 78c-5,78d, 78e, 78f, 78g, 78i, 78j, 78j-1, 78j-4, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 

78o, 78o-4, 78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 78dd, 78ll, 78mm, 80a-20, 80a-23, 

80a-29, 80a-37, 80b-3, 80b-4, 80b-11, 7201 et seq., and 8302; 7 U.S.C. 2(c)(2)(E); 12 

U.S.C.5221(e)(3); 18 U.S.C. 1350; and Pub. L. 111-203, 939A, 124 Stat.1376 (2010); and Pub. L. 

112-106, sec. 503 and 602, 126 Stat. 326 (2012), unless otherwise noted.  

*  *  *  *  * 

5.  Revise § 240.15c6-1 to read as follows:  

§ 240.15c6-1 Settlement cycle. 

(a) Except as provided in paragraphs (b), (c), and (d) of this section, a broker or dealer shall 

not effect or enter into a contract for the purchase or sale of a security (other than an exempted 



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security, a government security, a municipal security, commercial paper, bankers' acceptances, or 

commercial bills) 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. 

(b) Paragraph (a) of this section shall not apply to:  

(1) Contracts for the purchase or sale of limited partnership interests that are not listed on 

an exchange or for which quotations are not disseminated through an automated quotation system 

of a registered securities association;  

(2) Security-based swaps; or 

(3) Contracts for the purchase or sale of securities that the Commission may from time to 

time, taking into account then existing market practices, exempt by order from the requirements of 

paragraph (a) of this section, either unconditionally or on specified terms and conditions, if the 

Commission determines that such exemption is consistent with the public interest and the 

protection of investors. 

(c) Paragraph (a) of this section shall not apply to contracts for the sale for cash of 

securities that are priced after 4:30 p.m. Eastern Time (ET) on the date such securities are priced 

and that are sold by an issuer to an underwriter pursuant to a firm commitment underwritten 

offering registered under the Securities Act of 1933 or sold to an initial purchaser by a broker-

dealer participating in such offering provided that a broker or dealer shall not effect or enter into a 

contract for the purchase or sale of such securities that provides for payment of funds and delivery 

of securities later than the second business day after the date of the contract unless otherwise 

expressly agreed to by the parties at the time of the transaction. 



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(d) For purposes of paragraphs (a) and (c) of this section, the parties to a contract shall be 

deemed to have expressly agreed to an alternate date for payment of funds and delivery of 

securities at the time of the transaction for a contract for the sale for cash of securities pursuant to a 

firm commitment offering if the managing underwriter and the issuer have agreed to such date for 

all securities sold pursuant to such offering and the parties to the contract have not expressly 

agreed to another date for payment of funds and delivery of securities at the time of the 

transaction. 

6. Add § 240.15c6-2 to read as follows: 

§ 240.15c6-2 Same-day allocation, confirmation, and affirmation. 

(a) Any broker or dealer engaging in the allocation, confirmation, or affirmation process 

with another party or parties to achieve settlement of a securities transaction that is subject to the 

requirements of § 240.15c6-1(a) shall: 

(1) Enter into a written agreement with the relevant parties to ensure completion of the 

allocation, confirmation, affirmation, or any combination thereof, for the transaction as soon as 

technologically practicable and no later than the end of the day on trade date in such form as 

necessary to achieve settlement of the transaction; or 

(2) Establish, maintain, and enforce written policies and procedures reasonably designed to 

ensure completion of the allocation, confirmation, affirmation, or any combination thereof, for the 

transaction as soon as technologically practicable and no later than the end of the day on trade date 

in such form as necessary to achieve settlement of the transaction. 

(b) To ensure completion of the allocation, confirmation, affirmation, or any combination 

thereof for the transaction as soon as technologically practicable and no later than the end of the 



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day on trade date, the reasonably designed written policies and procedures required by paragraph 

(a)(2) of this section shall: 

(1) Identify and describe any technology systems, operations, and processes that the broker 

or dealer uses to coordinate with other relevant parties, including investment advisers and 

custodians, to ensure completion of the allocation, confirmation, or affirmation process for the 

transaction; 

(2) Set target time frames on trade date for completing the allocation, confirmation, and 

affirmation for the transaction; 

(3) Describe the procedures that the broker or dealer will follow to ensure the prompt 

communication of trade information, investigate any discrepancies in trade information, and adjust 

trade information to help ensure that the allocation, confirmation, and affirmation can be 

completed by the target time frames on trade date; 

(4) Describe how the broker or dealer plans to identify and address delays if another party, 

including an investment adviser or a custodian, is not promptly completing the allocation or 

affirmation for the transaction, or if the broker or dealer experiences delays in promptly 

completing the confirmation; and 

(5) Measure, monitor, and document the rates of allocations, confirmations, and 

affirmations completed as soon as technologically practicable and no later than the end of the day 

on trade date. 

7.  Add § 240.17Ad-27 to read as follows:  

§ 240.17Ad-27 Straight-through processing by clearing agencies that provide a central 

matching service. 



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(a) A clearing agency that provides a central matching service must establish, implement, 

maintain, and enforce written policies and procedures reasonably designed to facilitate straight-

through processing of securities transactions at the clearing agency.   

(b) A clearing agency that provides a central matching service must submit to the 

Commission every twelve months a report that includes the following:  

(1) A summary of the clearing agency’s policies and procedures required under paragraph 

(a) of this section, current as of the last day of the twelve-month period covered by the report 

required under paragraph (b) of this section;  

(2) A qualitative description of the clearing agency’s progress in facilitating straight-

through processing during the twelve-month period covered by the report required under paragraph 

(b) of this section;  

(3) A quantitative presentation of data that includes:  

(i) The total number of trades submitted to the clearing agency for processing; 

(ii) The total number of allocations submitted to the clearing agency; 

(iii) The total number of confirmations submitted to the clearing agency, as well as the total 

number of confirmations cancelled by a user; 

(iv) The percentage of confirmations submitted to the clearing agency that are affirmed on 

trade date, specifying to the extent practicable the relevant timeframe in which the affirmation is 

processed on trade date; 

(v) The percentage of allocations and confirmations submitted to the clearing agency that 

are matched and automatically confirmed through the clearing agency’s services; and 



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(vi) Metrics concerning the use of manual and automated processes by the clearing 

agency’s users with respect to its services that may be used to assess progress in facilitating 

straight-through processing.  

(4) Each of the data sets required under paragraph (b)(3) of this section shall be: 

(i) Organized on a month-by-month basis, beginning with January of each year, for the 

twelve months covered by the report required under paragraph (b) of this section; 

(ii) Separated, where applicable, between the use of central matching and electronic trade 

confirmation services offered by the clearing agency;  

(iii) Separated, as appropriate, by asset class;  

(iv) Separated by type of user; and 

(v) Presented on an anonymized and aggregated basis. 

(5) A qualitative description of the actions the clearing agency intends to take to further 

facilitate straight-through processing of securities transactions at the clearing agency during the 

twelve-month period that follows the period covered by the report required under paragraph (b) of 

this section. 

(c) Each report required under paragraph (b) of this section must be filed within 60 days of 

the end of the twelve-month period covered by the report required under paragraph (b) of this 

section, and the twelve-month period covered by each report shall commence on January 1 of the 

calendar year. 

(d) The report required under paragraph (b) of this section must be filed electronically on 

EDGAR and must be provided in an Interactive Data File in accordance with § 232.405 of this 

chapter (Rule 405 of Regulation S-T) and the EDGAR Filer Manual. 

PART 275—RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940 



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8.   The authority citation for part 275 continues to read, in part, as follows: 

Authority: 15 U.S.C. 80b-2(a)(11)(G), 80b-2(a)(11)(H), 80b-2(a)(17), 80b-3, 80b-4, 80b-

4a, 80b-6(4), 80b-6a, and 80b-11, unless otherwise noted.  

*  *  *  *  * 

Section 275.204-2 is also issued under 15 U.S.C. 80b-6.  

*  *  *  *  * 

9. Amend § 275.204-2 by revising paragraph (a)(7)(iii) to read as follows:  

§ 275.204-2 Books and records to be maintained by investment advisers. 

(a) *  *  * 

(7) *  *  * 

(iii) The placing or execution of any order to purchase or sell any security; and, for any 

transaction that is subject to the requirements of § 240.15c6-2(a) of this chapter, each confirmation 

received, and any allocation and each affirmation sent or received, with a date and time stamp for 

each allocation and affirmation that indicates when the allocation and affirmation was sent or 

received; 

*  *  *  *  * 

By the Commission. 

Date: February 15, 2023. 

 

Vanessa A. Countryman,  

Secretary.