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Statement of Commissioner Piwowar at Open Meeting Regarding Proposal to Shorten the Trade Settlement Cycle

Commissioner Michael S. Piwowar

Sept. 28, 2016

Thank you, Chair White.

I enthusiastically support this proposal to shorten the trade settlement cycle. Indeed, I have been quite vocal about the fact that I would have preferred for us to consider this rulemaking long ago.[1] The Commission’s agenda is admittedly crowded, but rarely is an issue as commonsensical as this one.

Shortening the trade settlement cycle has garnered broad support from a wide array of interests, including investor advocates, research organizations, and market participants.[2] The Commission’s Investor Advisory Committee (“IAC”) has gone so far to say that “[w]ith perhaps only one or two exceptions … we cannot think of any other higher impact measure that is within reach, that does not potentially have other adverse consequences.”[3] An industry steering committee has suggested that the benefits of shortening the settlement cycle would be “immediate.”[4] And even the Commission itself — in connection with the shift from a five-day settlement cycle to three days over a decade ago — acknowledged that the benefits of a shorter settlement cycle inure to all market participants.[5]

These glowing sentiments are not hyperbole. As has been discussed at length already today, and in detailed submissions to the Commission, shortening the trade settlement cycle is expected to reduce counterparty credit, liquidity, and market risks. It will increase capital efficiency and improve investor protection. And it will align trade processing in the United States to many other global markets. Years from now, investors will be puzzled about how a T+3 settlement cycle existed for so long. As such, this proposal is a “no brainer,” a “slam-dunk,” a “cakewalk” — pick your favorite metaphor.

While the proposal would shorten the current three-day (T+3) trade settlement cycle to two days (T+2), the release also asks questions about moving to a one day (T+1) trade settlement cycle. I preliminarily understand that a T+1 settlement cycle would produce distinct challenges and generate costs magnitudes above a T+2 settlement cycle, but I encourage commenters to tell us whether that is true and also identify the costs and benefits of each alternative relative to one another. And, to the extent the Commission adopts a rule for T+2, what, if anything, should we do with respect to further shortening the settlement cycle in the future?

Before I close, let me offer a few notes of gratitude. First, I want to join my fellow commissioners and thank the Commission’s dedicated staff for your work in bringing this impactful and concise proposal to fruition. Also, widespread praise is owed to the various outside individuals and groups who have advocated for a rulemaking to shorten the trade settlement cycle and laid the groundwork on which this proposal stands. Your white papers, letters, recommendations, and analyses have been of tremendous assistance. Finally, I want to thank my colleagues. Commissioner Stein, you have been a wonderful partner in advocating for this proposal. Chair White, thank you for making room on a busy agenda for this important rulemaking.

I have no questions.

[1] See, e.g., Statement Regarding the Delay in Proposing to Shorten the Trade Settlement Cycle, Commissioner Michael S. Piwowar (July 8, 2016), available at; Statement Regarding Proposals to Shorten the Trade Settlement Cycle, Commissioners Michael S. Piwowar and Kara M. Stein (June 29, 2015), available at

[2] See, e.g., “DTCC Recommends Shortening the U.S. Trade Settlement Cycle” (Apr. 2014), available at; “Shortening the Settlement Cycle: The Move to T+2” (2015), available at; Letter from John L. Thornton, et al., Committee on Capital Markets Regulation, to Chair Mary Jo White, SEC (Aug. 9, 2016), available at; “Recommendation of the Investor Advisory Committee: Shortening the Trade Settlement Cycle in U.S. Financial Markets” (Feb. 12, 2015), available at

[3] “Recommendation of the Investor Advisory Committee: Shortening the Trade Settlement Cycle in U.S. Financial Markets” (Feb. 12, 2015), available at

[4] “Shortening the Settlement Cycle: The Move to T+2” (2015), available at

[5] Securities Transactions Settlement, Securities Exchange Act Rel. No. 33023, 58 F.R. 52891 (Oct. 13, 1993) at 52894 (emphasis added).

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