On March 22, 2017, the Securities and Exchange Commission amended Exchange Act Rule 15c6-1 to shorten the standard settlement cycle for broker-dealers transaction from “T+3” to “T+2,” subject to certain exceptions. The SEC’s Office of Investor Education and Advocacy (OIEA) is issuing this investor bulletin to explain the new “T+2” settlement cycle and how it will affect certain transactions you place with your full-service or online brokerage firm.
What is Settlement?
When you buy or sell securities, “settlement” refers the official transfer of securities to the buyer’s account and the cash to seller’s account. Since 1993, the settlement cycle – the time between the transaction date and the settlement date – for most securities transactions has been three business days – often referred to as “T+3.” Under “T+3,” if you sold shares of ABC stock on Monday, the transaction would settle on Thursday.
What Will Change?
Under the new market-wide “T+2” settlement cycle, most securities transactions will now settle in two business days of their transaction date. For example, if you sell shares of ABC stock on Monday, the transaction would settle on Wednesday. That means that if you have a securities certificate, you may need to deliver your securities certificate to your broker-dealer earlier or through different means than you do today. If you hold your securities with your broker-dealer, your broker-dealer will deliver the securities on your behalf one day earlier. Similarly, if you are buying securities, you may need pay for your securities transactions one business day earlier. If you have a margin account, consult your broker to see how the “T+2” settlement cycle might affect your margin agreement.
Which Securities Does the New “T+2” Settlement Cycle Impact?
The “T+2” settlement cycle will apply to the same securities transactions covered by the “T+3” settlement cycle. These include transactions for stocks, bonds, municipal securities, exchange-traded funds, certain mutual funds, and limited partnerships that trade on an exchange. Consult your broker if you have questions about whether the “T+2” settlement cycle covers a particular transaction.
When Will “T+2” start?
The new “T+2” settlement cycle will apply to all applicable securities transactions occurring on or after September 5, 2017.
Where Can I Find Information on the New “T+2” Settlement Cycle?
SEC: Order Approving “T+2” Settlement Cycle
Various industry groups have included information on their respective websites regarding the “T+2” settlement change: www.ust2.com (provided by the Industry Steering Committee leading efforts with respect to the change); SIFMA (Securities Industry and Financial Markets Association); ICI (Investment Company Institute); and DTCC (The Depository Trust & Clearing Corporation).
For information on how the “T+2” settlement cycle may impact “ex-dividend” dates please review the following alerts from NYSE, NASDAQ, and FINRA.
If you have additional questions regarding the new “T+2” settlement cycle, you may e-mail SEC staff at T2settlement@sec.gov .
The Office of Investor Education and Advocacy has provided this information as a service to investors. It is neither a legal interpretation nor a statement of SEC policy. If you have questions concerning the meaning or application of a particular law or rule, please consult with an attorney who specializes in securities law.