Both SEC commissioners voted to modernize regulations that
require stock and bond trades to settle within three business days,
shortening that timeframe to two business days. The amendment is
designed to reduce credit and market risk, including the risk of a
trading counterparty defaulting. While technology now allows
investors to make trades in less than a second, since 1993 the
SEC's rules have required brokers to wait for three business
days between the time an investor's order is executed, to when
the cash and ownership of the security are exchanged. Acting SEC
Chairman Michael Piwowar called the previous T+3 settlement cycle
"antiquated" and added the shorter time frame will reduce
"the time horizon for risk exposures" and also
"should improve capital efficiency and enhance the resilience
of the national clearance and settlement system."
Broker-dealers must comply with the amended rule beginning on Sept.
5, 2017.
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