In February, the Securities and Exchange Commission (SEC) announced a rule change shortening the standard settlement cycle for securities trading by most broker-dealers from two business days after the trade date (T+2) to one business day after the trade date (T+1). It was adopted. The compliance date for the final rule is May 28, 2024.
While the merits of this move have been widely debated, one aspect that has received relatively little attention is currency conversion. Derek Coyle, European Custody Product Manager at BBH, previously pointed out that shortened settlement cycles will impact cross-currency trades that include an FX component, requiring FX trades to be booked or pre-funded on the same day. .
Execution late in the U.S. time has potential impact on market liquidity
Chris Gothard, BBH
Alex Knight, Head of Sales and EMEA at Baton Systems, said, “Shorter settlement times means less time to fix disruptions.” “People trading U.S. securities from outside the U.S. should consider exchange settlement times to ensure that they have cash available to settle their transactions.”
The global FX division of the Global Financial Markets Association believes that accelerating securities settlement to T+1 will require trade matching, confirmation and payment to be completed domestically, increasing the risk of not being able to finance transactions that rely on FX settlement in time. suggests that it will rise. Expiration time for currency.