SEC Issues Final Rules to Reduce Clearance and Settlement Risks

SEC, Securities and Exchange Commission
SEC, Securities and Exchange Commission Report

Settlement of securities transactions will take only one working day instead of two.

Sec’s rules to reduce risks

The Securities and Exchange Commission changed the rules so that most broker-dealer deals in securities will be settled one business day after the trade date (T+1) instead of two business days after the trade date (T+2). The final rule is meant to help investors and lower the credit, market, and liquidity risks that market players face when they buy or sell securities.

Gary Gensler, the head of the SEC, said, “I support this rulemaking because it will cut down on latency, lower risk, improve efficiency, and make the markets more liquid.” ” Today’s adoption takes care of one of the four things the Commission should do to deal with the meme stock events of 2021, as suggested by the staff. When put together, these changes will make our markets work more reliably, quickly, organised, and efficiently.

The final rules will shorten the normal settlement cycle and improve how institutional trades are handled. In particular, the final rules will say that a broker-dealer must either sign written agreements or set up, keep, and enforce written policies and procedures that are designed to As soon as possible and no later than the conclusion of the transaction date, use available technology to complete allocations, confirmations, and affirmations.

The final rules also say that qualified investment advisers must make and keep records of allocations, confirmations, and affirmations for certain securities deals.

Also, the final rules add a new requirement for certain types of clearing agents that offer central matching services to help with straight-through processing. New policies and processes to facilitate straight-through processing will need to be developed, implemented, maintained, and enforced by central matching service providers in accordance with the rules as written.

They will also have to send an annual report to the Commission that describes and quantifies the progress made on straight-through processing.

The adoption release is posted on SEC.gov and will be posted in the Federal Register. After being published in the Federal Register, the final rules will go into effect 60 days later. The last rules must be followed by May 28, 2024.

Leave a Reply

Your email address will not be published.