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Statement at Open Meeting on the Final Rule Amendment to Shorten the Transaction Settlement Cycle

Commissioner Kara M. Stein

March 22, 2017

Good morning. I would like to thank staff in offices throughout the Commission for their hard work on this final rule to shorten the settlement cycle for securities transactions. In particular, I would like to thank Jeff Mooney, Christian Sabella, Susan Petersen, Justin Pica, Andrew Shanbrom, and Jesse Capelle in the Division of Trading & Markets, and DERA’s Hari Phatak, Adam Yonce and Charles Lin.

Over 80 years ago, Wall Street was filled with “runners” who carried stock certificates and other documentation back and forth between brokers and dealers, banks, and others in the securities markets. Runners were critical to the final step of a securities trade settlement – the actual transfer of shares to the account of the buyer, and the transfer of money to the account of the seller.

Fast-forward 80 years, where advances in technology and communication have transformed the landscape of our securities marketplace. Instead of runners carrying documents, fiber-optic cables now carry digital signals faster than the blink of an eye. While trading is now nearly instantaneous, the final step in the securities settlement process is not. Today’s amended rule is an attempt to catch up with technology developments in the world around us. The current settlement cycle standard of three days after a trade is woefully behind the times. Currently, standards vary around the globe, but most are moving to shorter settlement cycles.

Today’s rule amendment begins the process of acknowledging how improvements in infrastructure and technology have fundamentally changed the securities settlement landscape. We no longer live in an era where back office functions are handled manually by human beings. We live, work, and transact in a digitalized world.

The amendment being voted on today will reduce the standard securities settlement cycle in the U.S. by one day, to T+2. Elongated settlement cycles have been associated with increased counterparty default risk, market risk, liquidity risk, credit risk and overall systemic risk.[1] Longer settlements may also contribute to inefficiencies in how capital moves from investors to companies.

Shortening the standard settlement cycle to T+2 at this time is a helpful step toward decreasing these risks and facilitating greater market certainty and efficiency.

That said, while movement to a T+2 standard settlement cycle is an improvement from the current T+3 standard, more can and should be done. At this very moment, technological, operational, and communications improvements exist that could enable T+1 and end-of-the-day settlement cycles.

Accordingly, I have asked the staff to study not only the changes resulting from a movement to a T+2 settlement cycle, but also to consider further improvements.

The study is due to the Commission within three years of the compliance date for today’s rule amendment. The report should provide the Commission with data and information regarding the implementation and impacts of T+2, and the possibility of further improving and shortening the standard settlement cycle. Our staff will welcome, and I encourage, input and insight from investors, market participants, academics, and others on the impact of the amended rule going forward.

Thank you.

[1] See e.g., Omgeo, “The Road to Shorter Settlement Cycles: Creating a Trade Date Environment in the US and Across Global Markets” (Mar. 2013), available at

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