SEC Proposes Shorter Settlement Cycle for Broker-Dealer Transactions

The Securities and Exchange Commission today issued a proposed rule to shorten the standard settlement cycle for most broker-dealer transactions in securities from two business days after the trade date to one business day after the trade date. The proposal also asks for comments on potential ways to further shorten the settlement cycle in the future.

SEC Chairman Gary Gensler noted that the proposed changes could help to reduce risk in the clearance and settlement process and lead to greater efficiencies in the markets. “Shortening the settlement cycle should reduce the amount of margin that counterparties would need to post with clearinghouses,” Gensler said. “Second, these changes would require affirmations, confirmations, and allocations to take place as soon as technologically practicable on trade date. Finally, the release would require clearing agencies that provide central matching services to have policies and procedures to facilitate straight-through processing—i.e., fully automated transactions processing.”

The comment period will remain open for 60 days following publication of the proposing release on the SEC’s website or 30 days following publication of the proposing release in the Federal Register, whichever period is longer.