T+2 Settlement Gathers Momentum
FINRA is seeking comment on proposed amendments to FINRA rules shortening the securities settlement cycle to two days. The rulemaking notice cites a September 2015 letter in which SEC Chair White responded to industry groups expressing her strong support for industry efforts to shorten the trade settlement cycle to T+2 and urging the industry to continue to pursue the necessary steps towards achieving T+2 by the third quarter of 2017. SEC Chair White also indicated that she instructed SEC staff to develop a proposal to amend Exchange Act Rule 15c6-1(a) to require settlement no later than T+2.
Exchange Act Rule 15c6-1 currently establishes “regular way” settlement as occurring no later than T+3 for all securities, except for government securities and municipal securities, commercial paper, bankers’ acceptances, or commercial bills. In anticipation of the SEC’s changes to Rule 15c6-1 to facilitate settlement no later than T+2 and to ensure that FINRA acts in concert and conformity with the impending rule changes by other self-regulatory organizations, or SROs, FINRA is proposing definitional changes to its rules pertaining to securities settlement by, among other things, amending the definition of “regular way” settlement as occurring on T+2. The proposed technical changes would implement the anticipated rule changes of the SEC and the other SROs.
The Municipal Securities Rulemaking Board, or MSRB, has also filed a rule proposal with the SEC to define regular-way settlement for municipal securities transactions as occurring on a two-day settlement cycle.
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