The 28th of May 2024 marks a significant shift for transaction settlements in US markets. The settlement period for virtually all transactions will be trimmed down from two business days post-trade date (T+2) to only one business day after the trade date (T+1). The move, while largely placing the regulatory obligations and burdens on broker-dealers, is not exclusive in its effects. It poses a series of considerations for investment advisers and other market players.
Investment advisers, as well as other market participants, are expected by their broker-dealer counterparts to meet certain benchmarks. These encompass the confirmation, allocation in addition to payment and settlement practices. The shortened settlement period indicates that investment advisers will have to expedite these processes significantly to comply with the shortened settlement period or risk incurring penalties or fees.
Several measures need to be taken ahead of this regulatory adjustment. Investment advisors should review their current policies and procedures to identify any aspects that need to be updated or altered to adapt to the quicker turnaround. They may also need to evaluate their technological efficiency to make certain that their current systems can handle the increased speed and volume of transactions.
Collaboration with their broker-dealer counterparts and clients may be essential to ensure a smooth transition. Open lines of communication will allow for the addressing of any issues that may emerge as a result of these changes more swiftly.
In essence, this change underscores the continual evolution of the financial market industry, as it seeks to streamline operations for improved efficiency. Advisers will need to reassess various aspects of their operational framework to align with this new reality.
You can read more about this upcoming change and its implications here.