On September 5, 2017, the securities industry transitioned to a shorter settlement cycle for most broker-dealer securities transactions, pursuant to amendments to Rule 15c6-1(a) under the Securities Exchange Act of 1934 adopted by the SEC in March 2017. As noted in a comment letter from the Investment Company Institute, the move from three business days after the trade date (i.e., T+3) to two business days after the trade date (i.e., T+2) for the standard settlement cycle reduces the timing mismatch and funding gap between settlement of a mutual fund’s portfolio security trades and the settlement of transactions in the shares of the mutual fund itself (which generally settle on a T+1 basis), improving cash management for funds to meet redemptions.

In the SEC’s adopting release for the rule amendments, the SEC acknowledged that a move to an even shorter T+1 settlement cycle “could have similar qualitative benefits of market, credit, and liquidity risk reduction for market participants as a move to a T+2 standard settlement cycle.” Accordingly, the adopting release directs the staff of the SEC to submit a report to the SEC no later than September 5, 2020 that will include an examination of:

(1) the impact of the establishment of a T+2 standard settlement cycle on market participants, including investors;

(2) the potential impacts of moving to a shorter settlement cycle beyond T+2;

(3) the identification of technological and operational improvements that can be used to facilitate moving to a shorter settlement cycle; and

(4) cross-market impacts (including international developments) related to the shortening of the settlement cycle to T+2.