Speeding Up Stock Settlements: U.S. Leads Global Drive for Quicker Transactions

Find out how the U.S. is leading the way in making stock trades settle faster. Learn about the move to T+1 and how it's affecting global markets.

Mar 21, 2024 - 01:39
Mar 21, 2024 - 01:40
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Speeding Up Stock Settlements: U.S. Leads Global Drive for Quicker Transactions
Speeding Up Stock Settlements: U.S. Leads Global Drive for Quicker Transactions

The U.S. is making moves to speed up how quickly stock trades are settled. This change, called T+1, is set to reduce risks and improve efficiency. But where does the rest of the world stand on this? Let's take a closer look.

Why Faster Settlement Matters:

When you buy or sell stocks, the settlement process is how the transaction gets finalized. In the U.S., this typically takes two business days after the trade. But now, the Securities and Exchange Commission (SEC) is shortening this to just one day, starting from May 28, 2024. This move, known as T+1, aims to make things quicker and safer for investors and markets.

Comparison with Other Countries:

U.S., Canada, and Mexico:

The U.S. isn't alone in this shift. Canada and Mexico are also moving towards one-day settlement, with their change happening a day earlier than in the U.S., starting from May 27.

European Union (EU):

In Europe, they're looking at following the U.S. example, but they haven't set a timeline yet. They're studying the pros and cons and plan to make a decision later this year. However, experts think this might be more complicated due to how stock trading works in different European countries.

United Kingdom (UK):

The UK is also considering speeding up its settlement process. They're studying the benefits and challenges and expect to make a decision between 2025 and 2026. Reports on this are due out soon.

Asia:

In India, trades already settle one day after the trade, and they're aiming for same-day settlement next. China is ahead of the curve with same-day and next-day settlements for stocks and cash. Most other Asian markets are watching and waiting to see how things go before making changes themselves.

Conclusion:

The U.S. is leading the way in making stock settlement faster and safer. Other countries are taking notice and making their own plans. As the world moves towards quicker settlement, investors and markets can expect to see benefits in efficiency and risk reduction.

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