New SEC T+1 Settlement Rule Speeds Up Stock Trading

The seal of the US Securities and Exchange Commission (SEC) is seen at its headquarters in Washington, D.C., on May 12, 2021. Andrew Kelly/Reuters

In a move aimed at benefiting investors and reducing market risk, the Securities and Exchange Commission (SEC) introduced the T+1 settlement rule, which shortens the settlement cycle for most securities transactions from two business days (T+2) to one business day (T+1). This change, effective from May 28, marks a notable shift in the U.S. stock market’s operational dynamics, a transformation not seen in over a century.

The T+1 settlement cycle will apply to the following securities:

• stocks
• corporate bonds
• exchange-traded funds (ETFs)
• municipal securities
• some mutual funds
• limited partnerships that trade on exchanges

The T+1 settlement rule is part of a broader set of rule amendments adopted by the SEC on Feb. 15, 2023, designed to enhance the efficiency and safety of securities transactions. This initiative comes as a response to the rapidly evolving market landscape, where technology and investor expectations demand faster and more secure settlement processes.