Financial markets association pleased with shift to faster trade settlement

By Thomson Reuters May 29, 2024 | 9:45 AM

NEW YORK (Reuters) – The Securities Industry and Financial Markets Association (Sifma) said on Wednesday it is pleased with the transition to faster trade settlement, adding it continues to monitor progress.

On Tuesday, U.S. trading of equities, corporate and municipal bonds and other securities moved to a one-day securities settlement cycle (T+1) from two days (T+2), to comply with a rule change adopted last February by the U.S. Securities and Exchange Commission.

Settlement is the process of transferring securities or funds from one party to another after a trade has been agreed.

The shift in the world’s largest financial market is aimed at making market infrastructure more resilient, but it has put investors and regulators on alert for increased trade failures and other hiccups.

Wall Street is undergoing its first big test on Wednesday, when trades executed last Friday, when T+2 was still in place, and trades from Tuesday, the first day of T+1, will be settled. This is expected to lead to a rise in volume.

Market participants expect to see an increase in trade failure as the industry adjusts to the faster settlement cycle. Research firm ValueExchange said on average market participants expect the fail rate to increase to 4.1% after T+1 implementation, from 2.9%.

(Reporting by Carolina Mandl in New York; Editing by Rod Nickel)