Important information regarding the shortened settlement cycle from T+2 to T+1

The U.S. Securities and Exchange Commission (SEC) has decided to adopt a shortened standard settlement cycle, beginning on May 28, 2024. As a result, most U.S. securities transactions will settle one business day after the trade date (“T+1”), rather than the current two-day settlement cycle (“T+2”).

This change will promote investor protection by reducing clearance and settlement risk of these securities as well as allow for faster payment following the sale of a security.

What you need to know

• Purchasers must make funds available one day earlier, and sellers must make securities available, in good deliverable form, one day earlier to cover transactions and avoid overdrafts and failed trades.
• Trades executed:
  • Before May 28, 2024, will be settled following a T+2 settlement cycle.
  • On or after May 28, 2024, will be settled following a T+1 settlement cycle.
  • Canada markets and Mexican equity markets will adopt the T+1 settlement cycle beginning on May 27, 2024, as they are not impacted by the Memorial Day holiday.
• Products in scope for U.S. T+1 include:
  • Most equities, corporate and municipal bonds, unit investment trusts (UITs), exchange-traded funds (ETFs), American depositary receipts (ADRs), rights and warrants settling at the Depositary Trust Company (DTC), and non-agency mortgage-backed security (MBS) bonds.
• Securities not impacted by U.S. T+1 include:
  • Firm commitment equity and debt offerings, U.S. government-issued securities, and security-based swaps. However, it is expected that market participants will incorporate the new settlement cycle into equity swap terms to avoid mismatches between the settlement of the swap and related hedges.
• As the settlement cycle for spot foreign exchange (FX) transactions in most currency pairs will remain T+2, most FX transactions entered into on the securities trade date will not settle in time to fund a transaction that settles T+1. As a result, if you engage in U.S. securities transactions requiring currency conversion, please consider how you intend to fund these transactions after the implementation of T+1 to avoid settlement failures.