By Steve Dinnen
T+1 is here! On or about May 28, my brokerage informs me, financial industries in the United States, Canada and Mexico plan to shorten the settlement cycle process that controls a significant volume of financial activity. The settlement cycle for buying and selling stocks, exchange-traded funds and certain other securities that trade on exchanges, as well as for buying and selling corporate and municipal bonds, will shorten from two business days after trade date (known as T+2) to a single business day after trade date (T+1).
They say this change will lower costs, increase market efficiency and reduce settlement risk in security transactions. For you, the investor, certain processes related to your trading activity will change. In particular, you must provide payment more promptly following a purchase on the local or international exchanges. On the flip side, you’ll receive payment faster following the sale of a security.
I’m old enough to (vaguely) remember the days of what, T+5? Or was it T+7? I’m not certain we even assigned a name to it, but it felt like you had forever to pay your due. And the broker, of course, had forever to settle and get you your money.
