Magazine article American Banker

3-Day Securities Settlement Means Big Changes

Magazine article American Banker

3-Day Securities Settlement Means Big Changes

Article excerpt

The securities industry's effort to move to a shorter, three-day settlement cycle - known as T+3 - will mean fundamental changes in the way some Wall Street players conduct business.

Accelerating the settlement cycle will not just affect settlement. It will also, over time, force a redefinition of accountability, responsibility, and organizational ownership for every market participant.

The Securities and Exchange Commission, which mandated the shorter settlement cycle beginning last month, believes that moving to T+3 from T+5 is the most prudent response to the increased volume and volatility in the marketplace.

Almost everyone agrees that the change will reduce the risk related to open security positions as well as producing greater conformity in settlement time frames as the marketplace becomes more globalized.

Usually such regulations require system modifications and sometimes staffing increases, but for most organizations there is not a significant amount of change that takes place.

Is this regulation really just like all the rest? Perhaps not.

On the surface, the change may appear as a minor adjustment. But it may well have a major impact down deep inside many organizations, as accountability begins to move from the back office to the front office - or perhaps to a new "middle" office.

Reengineering the whole process may be what is really needed in many organizations. Be sure of one thing: This change will have a cost associated with it before the industry settles down to business as usual. …

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