On March 22, 2017, the United States Securities and Exchange Commission (the “SEC”) adopted an amendment to shorten the standard settlement period for most broker-dealer transactions from three business days (referred to as “T+3” settlement) to two business days (referred to as “T+2” settlement). Broker-dealers will be required to comply with the T+2 settlement period starting on September 5, 2017.

The amended Rule 15c6-1(a) will prohibit a broker-dealer from effecting a purchase or sale of a security where the payment of funds and delivery of securities is later than T+2, unless expressly agreed upon by the parties. Therefore, when purchasing or selling securities, brokerage firms must receive payment no later than two business days after the trade is executed.

This marks the first change to the standard settlement cycle in the U.S. markets in 23 years, when the SEC adopted a rule that reduced the cycle from five business days to three business days. In its press release announcing the amendment, the SEC pointed to technology’s improvement, calling the T+3 settlement period “outdated.” The shortened settlement period is intended to increase efficiency while reducing risk for market participants.

The SEC’s Press Release announcing the amendment can be found here. If you have any questions or concerns about the amended settlement cycle, please contact one of the attorneys listed below.