Stinson Leonard Street Dodd Frank

MAKING SENSE OF DODD-FRANK

The Dodd-Frank Act has broad and deep implications that will touch every corner of financial services and multiple other industries. This site, developed and maintained by attorneys at Stinson Leonard Street, is dedicated to making sense of this complex legislation and helping businesses understand how it will affect them specifically. Our Bloggers »

Dodd-Frank

SEC Approves T+2 settlement; Abides by T+4 settlement for Firm Commitment Deals

by   |   February 14, 2017

On February 10th, the SEC took action to formally approve of changes proposed by the NASDAQ Stock Market, NYSE MKT LLC, and New York Stock Exchange LLC’s, to shorten the standard settlement cycle for most broker-dealer transaction from three business days (T+3) to two business days (T+2).

According to each of the releases (available here, here and here), the exchanges plan to publicly announce the effective date of the adopted rule at a later date and file a separate proposed rule change, triggering an industry-led transition to a T+2 standard settlement. The Depository Trust and Clearing Corporation, in collaboration with the Investment Company Institute, SIFMA, and other market participants, have formed an Industry Steering Group (“ISC”) and an industry working group to facilitate the transition to a T+2 settlement cycle.  The ISC has identified September 5, 2017, as the target date for the transition to a T+2 settlement cycle to occur.

The proposed change appears to have been met with widespread approval, receiving only two comment letters (expressing support for the proposed change) after being published in the Federal Register in late December.

The SEC’s adopting release does not, however, address the shortening of the T+4 settlement standard currently in place for certain firm commitment offerings under the exemption in Rule 15c6-1(c), as previously discussed in our prior posting (available here).  It appears that, for now, despite contemplating such a change and soliciting for comment in the proposing release, the SEC and SROs are content to retain T+4 settlement for firm commitment offerings.