Feb. 19, 2022
February 19, 2022 I support the reduction of settlement cycles as outlined in S7-05-22. I am not commenting on the other new requirements on financial entities proposed in S7-05-22. Lengthy settlement cycles are a relic from the days where physical stock certificates might have to be shipped across the world in order to clear a transaction. However these days it is done digitally, whether it's a traditional exchange or a blockchain exchange, meaning shipping a digital certificate across the world takes milliseconds instead of days. There is no longer any accessibility or logistical benefits for having anything longer than instantaneous settlement. However, there are some vulnerabilities to having long settlement periods that market participants can exploit to profit off of other participants in ways that are not conductive to free markets, such as strategic failures to deliver. Shorter settlement periods gives such rent-seeking entities less time to profit from a single strategic failure to deliver, therefore they gain less profit to the benefit of regular, more honest trading activities. While I would like instantaneous settlement to be the standard, moving from T+2 to T+1 is a step in the right direction.