Faster Trade Settlement is Imminent

Your stock and bond trade settlement time is about to get much faster.

When an investor buys or sells publicly traded securities including stocks or corporate and municipal bonds, the price is locked in and contractually binding immediately but the actual transaction of cash and security transfer takes more time. The time for that transaction is the "settlement" time, which the U.S. Securities and Exchange Commission (SEC) has held at T+2 days since 2017.

Effective Tuesday, May 28th, the SEC is mandating a shift to a T+1 settlement time, meaning that transactions must be settled the business day following a trade rather than two days later. This shift will serve to make markets more efficient and reduce gaps in cash availability, which is a net positive for investors and market resilience.

However, there will likely be friction of transition in the short term, as banks and custodians adjust to the new requirements and streamline their systems and processes to support faster transaction settlement. Specifically, foreign exchange trades may initially see a bumpy transition, since other countries don't necessarily have the same settlement timeline mandates. 

The most tangible and immediate benefit to Fortis Wealth Management's private wealth clients will be the ability to access cash from selling investment positions a single day after making a trade, rather than waiting two days for the cash to settle.

- Tony Winkels is Managing Partner and Wealth Advisor at Fortis Wealth Management