1 Analyses of this federal-register by attorneys

  1. SEC Approves T+2 Settlement

    Dechert LLPElliott CurzonApril 20, 2017

    settlement cycle gives broker-dealers a shorter timeframe in which to comply with the requirements of Rule 10b-10, the SEC noted that most brokers already send electronic trade confirmations on the trade date or physical confirms on T+1, and thus the change to T+2 should not affect current practices.Footnotes1)Release No. 34-80295 (Mar. 22, 2017), 82 Fed. Reg. 15564 (Mar. 29, 2017) (Adopting Release).2) In the late 1960’s, brokerages, then relying on paper recordkeeping and physical delivery of paper stock certificates, found themselves unable to keep up with a surge in the volume of trading, causing a deluge of trading “fails,” where firms failed to deliver or receive securities within the then-standard five business days of the trade date, which often led to failures of the brokerages themselves. FINRA, The Alert Investor, When Paper Paralyzed Wall Street, Alice Gomstyn, Aug. 19, 2015.3) Release No. 34-49405 (Mar. 11, 2004), 69 Fed. Reg. 12922 (Mar. 18, 2004).4) Release No. 34-78962 (Sep. 28, 2016), 81 FR 69240 (Oct. 5, 2016) (Proposing Release).5)A full list of securities subject to the T+2 settlement cycle is available at the DTCC FAQ.6) While transactions in most open-end funds settle on T+1, broker-dealers transacting with respect to certain retail funds may currently settle on T+3 and will be required to settle on a T+2 cycle going forward. Note that Section 22(e) of the Investment Company Act of 1940 requires the funds themselves to satisfy redemption requests within seven days absent the circumstances described thereunder. Notwithstanding the requirements under Section 22(e), any open-end fund transactions effected through a broker-dealer must settle within three days because the broker-dealer is subject to Rule 15c6-1(a).7) The SIFMA comment letter to the Proposing Release notes that, were the United States to transition to T+2, more than 77% of top ten markets worldwide would be operating under T+2. Thomas F. Price, Managing Director, Operations and Technology & BCP, Securities Indu