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Effective on May 28, 2024, the Securities and Exchange Commission (SEC) will adopt a new settlement cycle – T+1 (previously T+2) – which, for most broker-dealer transactions, will take one business day after the trade date instead of two. This change is due to technological improvements that allow trades to settle more quickly. The transition is expected to benefit investors and other market participants with reduced costs, increased market efficiency, and reduced settlement risk in securities transactions.   

The last update to the SEC's T+2 settlement cycle occurred on September 5, 2017. 

What does this mean for the industry? 

This Securities and Exchange Commission (SEC) rule change affects one of the most fundamental investing concepts: the settlement cycle. On the settlement date, the buyer receives or takes ownership of a security, and the seller receives funds. Currently, the settlement cycle is trade date plus two business days (T+2). However, with the rule revision, it will only take one business day (T+1). 

Technology has improved, settling trades more quickly. It's expected to bring benefits to investors and other market participants. It will produce reduced costs, increased market efficiency, and lower risk when settling security transactions. 

In short, this change poses positive benefits to the industry:  

• Less waiting: You get your stocks (or money from selling them) much faster. 
• Safer trades: There's less chance of issues between buyers and sellers. 
• Potentially lower fees: Less risk for companies might mean lower fees for you. 
• More money moving: Money tied up in trades gets freed up faster to be used for other things.

What’s the impact on those taking pre-licensing exams? 

• For students testing before Tuesday, May 28, questions influenced by transaction settlement should be answered using T + 2. 
• For students testing on or after Tuesday, May 28, questions influenced by transaction settlement should be answered using T + 1. 

The benefit of the exam is that most settlements are the same now (less memorization of different settlement dates). Options and U.S. government bonds in the second market already settled T+1, so this new rule will align with current settlements. The ex-date and record date are now the same day, so it will be more straightforward to calculate entitlements to the dividend.   

What does the future hold for the impact of technology on the financial services industry?  

Some people have already been asking: what about T+0? There are some concerns about the infrastructure, processes, and risk management needed for this change. We're not sure when it will happen, but ongoing discussions and technological advancements will likely make it possible one day. 

Moving to T+0 settlement is not likely in the near future due to concerns about infrastructure, processes, and risk management. Industry participants believe significant changes would be needed, making implementation challenging.  

Ongoing discussions and technological advancements may eventually make it possible, but for now, it remains uncertain. 

Learn more about the new T+1 Settlement Cycle from the U.S. Securities and Exchange Commission: What Investors Need to Know: Investor Bulletin