Countdown to T+1: Impact on Prime Brokerage
On February 15, 2023, the Securities and Exchange Commission (SEC) adopted a rule amendment to shorten the standard settlement cycle for most routine securities trades from two business days after the trade date to one business day after the trade date, also known as T+1 (i). The proposed May 2024 deadline has lit a fire under market participants, who must move quickly to prepare for the change.
This amendment is expected to lower risk, and promote efficiency, as well as increase liquidity in the markets. It’s one way in which the SEC is seeking to address recent episodes of market volatility, including the “meme stock” events of 2021 and the COVID-19 pandemic.
Impact on hedge funds and asset managers
The move to T+1 settlement will have a great impact on hedge funds and asset managers. One of the most significant benefits is that it will align the settlement date for options and equity traders, helping everything from treasury financing to margin funding. This has the potential to lower margin requirements and benefit the buy side by shortening the time frame between execution and settlement. It will certainly reduce the level of margin market participants must post to offset the settlement risk, particularly during periods of heightened market volatility.
Keep reading on our blog:
https://www.clearstreet.io/insights/countdown-to-t-1-impact-on-prime-brokerage
i) SEC
A version of this article originally appeared in TabbForum.
Clear Street does not provide investment, legal, regulatory, tax, or compliance advice. Consult professionals in these fields to address your specific circumstances. These materials are: (i) solely an overview of Clear Street’s products and services; (ii) provided for informational purposes only; and (iii) subject to change without notice or obligation to replace any information contained therein.
Copyright © 2023 Clear Street LLC. All rights reserved. CLEAR STREET and the Shield Logo are Registered Trademarks of Clear Street LLC.
