Statement Regarding the Delay in Proposing to Shorten the Trade Settlement Cycle

Written by Commissioner Michael S. Piwowar


Just over a year ago, Commissioner Stein and I issued a joint statement in support of a proposal to shorten the trade settlement cycle from three business days after a trade is executed (T+3) to two business days (T+2).[1]  Our voices added to the chorus of endorsements for such a rulemaking,[2] which have since reached a crescendo.[3]  The drumbeat for Commission action on this important topic is premised on the general expectation that shortening the settlement cycle will, among other benefits, enhance the efficiency of the securities markets, decrease risks in the financial system to retail investors and other market participants, and conform trade processing in the United States to other global markets.

Despite the widespread support for a proposal that would shorten the settlement cycle to T+2, the Commission has yet to act.  Quite notably, our failure to promulgate such a proposal is in contravention of the agency rule list published in the most recent Regulatory Flexibility Agenda, which specified a June 2016 action date for this project.[4]  Also, we have left market participants wondering whether the Commission is truly committed to shortening the settlement cycle.

The delay in issuing a T+2 proposal is wholly unacceptable.  That the rulemaking has languished is not only frustrating to me personally, but is detrimental to efforts to improve investor protection.  I continue to vigorously advocate for the Commission to act promptly on this rulemaking, and I encourage others to do the same.

[1] Commissioner Michael S. Piwowar and Commissioner Kara M. Stein, Statement Regarding Proposals to Shorten the Trade Settlement Cycle (June 29, 2015), available at http://www.sec.gov/news/statement/statement-on-proposals-to-shorten-the-trade-settlement-cycle.html.

[2] See, e.g., DTCC Recommends Shortening the U.S. Trade Settlement Cycle (Apr. 2014), available at http://www.dtcc.com/~/media/Files/Downloads/WhitePapers/T2-Shortened-Cycle-WP.pdf;Shortening the Settlement Cycle: The Move to T+2 (June 18, 2015), available at http://www.ust2.com/pdfs/ssc.pdf; Recommendation of the Investor Advisory Committee: Shortening the Trade Settlement Cycle in U.S. Financial Markets (Feb. 12, 2015), available at http://www.sec.gov/spotlight/investor-advisory-committee-2012/settlement-cycle-recommendation-final.pdf (“With perhaps only one or two exceptions … we cannot think of any other higher impact measure that is within reach, that does not potentially have other adverse consequences, and that can so substantially lessen what is otherwise significant systemic risk.”).

[3] See, e.g., Commissioner Daniel M. Gallagher (@DanGallagherGrp), Tweet (July 1, 2015) (“I absolutely agree with Cmrs Piwowar & Stein on their T+2 statement), available at https://twitter.com/dangallaghergrp; Commissioner Luis A. Aguilar, The Benefits of Shortening the Securities Settlement Cycle (July 16, 2015), https://www.sec.gov/news/statement/benefits-of-shortening-the-securities-settlement-cycle.html; Letter from SEC Chair Mary Jo White to Kenneth Bentsen, Jr. and Paul Schott Stevens (Sept. 16, 2015), available at https://www.sec.gov/divisions/marketreg/chair-white-letter-to-sifma-ici-t2.pdf.


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