SEC Adopts Amendment to Shorten Settlement Cycle for Securities Transactions -

On March 22, the Securities and Exchange Commission adopted an amendment to Rule 15c6-1(a) that shortens the standard settlement cycle for most broker-dealer securities transactions from three business days (known as T+3) to two business days (or T+2). Specifically, the rule, as amended, would prohibit a broker-dealer from entering into a contract for or effecting the purchase or sale of securities in which payment for and delivery of the securities occurs later than T+2, unless the parties agree otherwise at the time of the transaction or the transaction involves exempted securities or other securities to which Rule 15c6-1(a) does not apply (e.g., government securities and commercial paper). Bolstered by technological improvements that support a shorter settlement cycle, the amended rule is intended to decrease counterparty default risk, market risk, liquidity risk, credit risk and overall systemic risk and reduce inefficiencies in the movement of capital from investors to companies. Investors and broker-dealers must comply with the amended rule starting on September 5.