Countdown to T+1 on Wall Street
Wall Street is preparing to shorten the time it takes for the money to be transferred to the account after the transactions in stock purchases and sales are completed.
As of May 28, Wall Street is preparing to shorten the time it takes for the money to be transferred to the account after the transactions are completed in stock purchases and sales. While previously the transfer to the account took place two days after the transaction (T+2), it will now be done one day later (T+1).
This shortening of the period is expected to have implications not only for the United States but also around the world, given the dominance of US securities in global indices. Every aspect of the market structure may be affected by this process, including funding, liquidity, securities lending, FX and Exchange traded funds.
This transition could cost investors $31 billion annually, according to estimates from Bloomberg Intelligence. “Every aspect of the market structure will be reshaped by this evolution,” economists Nicholas Phillips and Larry R Tabb said in their evaluation.
The SEC, the US capital markets board, explained that a shorter settlement window would mean that the buyer or seller is less likely to default before the transaction is completed. This also means lower margin requirements for the broker. Settlement for US Treasuries currently occurs at T+1.