CEO CHAT: Bill Capuzzi, Apex Clearing


Recently, the U.S. Securities and Exchange Commission voted to reduce the clearing duration for securities trades from trade date plus three days, to plus two. While Wall Street cheered what it viewed as a long overdue reduction, one chief executive said an even shorter clearance cycle would better serve the markets.

Bill Capuzzi, Apex

In an exclusive discussion with Traders Magazine, Apex Clearing’s Bill Capuzzi noted that more than ever before, Wall Street is a business where time equals money. So, the SEC’s recent decision to reduce the standard settlement time from three business days (T+3) to two (T+2) is a good first step in keeping pace with the modernization of the financial services industry.

“If you’re an active institutional or non-active retail investor, you’ve probably felt the frustration of the current T+3 settlement timeframe before: you research a company, execute a trade, and then wait days before the trade actually shows up in your account,” Capuzzi said. “This type of delay is a relic of the past – it has no place in 2017.”

Capuzzi said that today’s technology eliminates the need for lag time before a trade is settled. And it goes without saying that today’s investors expect instantaneous results. With trading platforms operating on micro-seconds, he added waiting two days for a trade to clear is like taking a picture with your phone and then printing it out to share with friends.

But in moving away from the manual era, the SEC did not go far enough,” Capuzzi continued. A one day settlement (T+1) makes more sense given the lightning speed that equity shares are traded today.,

“From our work providing digital-based wealth management solutions, we understand – and repeatedly hear from our customers – that the keyword is “efficiency,” he said. “Shortening the time between retail investors receiving funds and/or reinvesting proceeds from a trade would be an improvement on multiple levels.”

First, Capuzzi said a T+1 cycle would further minimize systemic credit and market risk. With the financial world trying to eliminate as much risk as they can, everyone should be pushing for a one day settlement.

“Second, a T+1 cycle would move the industry closer to aligning settlement times across international standards,” he added. “The globalization of financial services makes this point all the more relevant. Further, there is currently no barrier for equities: If options and futures transactions, which are inherently more complicated, can be settled in one day along with equities in most of Europe, then why should two days be needed in the U.S. to settle an equity trade?”

The benefits of adopting a T+1 settlement cycle – primarily, creating a more stable financial system – are in everyone’s best interests, Capuzzi told Traders. “The SEC is heading in the right direction by reducing the settlement cycle, but could also be doing more to de-risk and make the U.S. equity markets more efficient.”

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