The settlement cycle is defined as the time between a securities transaction being traded and when the transaction is settled.
A transaction is settled when either the payment for the purchases of assets is made, or when the payment for the sales of assets is received.
The trade date is commonly referred to as “T” and then the following number will indicate the number of days after which the assets are settled (e.g. T+2, T+1).
Until recently, the majority of global markets were aligned to a settlement cycle of two days (T+2) mainly for capital markets. We are now seeing a trend from financial markets around the world to move towards shortened standard settlement cycles.
The benefits of reducing the time between trade execution and settlement for investors and market participants include reduced costs, increased market efficiency and reduced credit, counterparty, and settlement risk, particularly during periods of high volume and volatility.
In most markets this change to the settlement cycle would see a reduction from two business days after trade date (T+2) to one (T+1), depending on the securities in scope.
For more information on the implementation of T+1 in specific countries/regions please visit our dedicated pages:
