Featured Insight

What's in a Day? Navigating a move to T+1 Settlement

August 2021 • by Luke Barnett & Gerard Callaghan

Earlier this year, the Depository Trust & Clearing Corporation (DTCC) proposed a plan for shortening the settlement cycle for U.S. equities from two business days after the trade is executed (T+2) to one business day (T+1).¹ Joining DTCC in support of this effort are the Investment Company Institute (ICI) and the Securities Industry and Financial Markets Association (SIFMA). Under the proposed roadmap, the transition to T+1 would occur by 2023.²

The goal of reducing the time between trade and settlement is to reduce risk and improve capital efficiency while maintaining the benefits of the current market infrastructure – in particular, preserving the netting function currently performed by the National Securities Clearing Corporation (NSCC). DTCC has been working to improve settlement efficiencies for some time through its Integrated Settlement model,³ and this effort is part of a trend that began with the move from T+5 to T+3 in the early 1990s. The most recent change to the settlement cycle was the 2017 migration from T+3 to T+2.

The goal of this Point of View is to offer a high-level perspective on the types of operational updates or transition risks that market participations may need to manage. A full background of this initiative or discussion of applicable regulations is beyond the scope of this paper.

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