In May 2024, a tectonic shift will be felt across the international capital markets because the US, in collaboration with Canada and Mexico, is set to transition from the current two-day settlement cycle (T+2) after trade execution to a more streamlined one-day cycle (T+1). This move will dramatically reduce the time for market participants to complete a whole range of post-trade activities that lie between the execution of a trade and its settlement, such as the simultaneous delivery of the securities and cash.
The move, recently finalised by the US Securities and Exchange Commission after extensive industry deliberation led by the Depository Trust and Clearing Corporation, seeks to mitigate credit and counterparty risks, potentially reducing margin requirements and fostering operational efficiency. In light of events surrounding so-called meme stocks like GameStop in 2021, the initiative also aims to enhance investor protection.
