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The Securities and Exchange Commission has finalised rule changes to cut the settlement cycle to one business day in order to reduce risks in the clearance and settlement of securities.
The final rules will also improve the processing of institutional trades, says the SEC, by requiring a broker-dealer to either enter into written agreements or establish, maintain, and enforce written policies and procedures “reasonably designed to ensure the completion of allocations, confirmations, and affirmations as soon as technologically practicable and no later than the end of trade date”.
The rules also require registered investment advisers to make and keep records of the allocations, confirmations, and affirmations for certain securities transactions.
Finally, there will be a new requirement to facilitate straight-through processing, which applies to certain types of clearing agencies that provide central matching services.
SEC chair Gary Gensler says: “Today’s adoption addresses one of the four areas the staff recommended the Commission address in response to the meme stock events of 2021. Taken together, these amendments will make our market plumbing more resilient, timely, orderly, and efficient.”
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