News
Financial Markets Association pleased with move to faster trade settlement
NEW YORK (Reuters) – The Securities Industry and Financial Markets Association (Sifma) said on Wednesday it is pleased with the transition to faster trade settlement, adding that it continues to monitor progress.
On Tuesday, trading in U.S. stocks, corporate and municipal bonds, and other securities moved from a two-day (T+2) to a one-day (T+1) bond settlement cycle to comply with a rule change adopted last February by the USA. Security and Exchange Commission.
Settlement is the process of transferring securities or funds from one party to another after a trade has been agreed.
The change in the world’s largest financial market aims to make market infrastructures more resilient, but has put investors and regulators on alert for increased trading failures and other setbacks.
Wall Street gets its first big test on Wednesday when trades executed last Friday, when T+2 was still in effect, and trades from Tuesday, the first day of T+1, will be settled. This is expected to lead to an increase in volume.
Market participants expect to see an increase in trading failure as the industry adjusts to the faster settlement cycle. Research firm ValueExchange said that, on average, market participants expect the failure rate to increase from 2.9% to 4.1% after the implementation of T+1.
(Reporting by Carolina Mandl in New York; Editing by Rod Nickel)