The United States is taking steps to speed up the speed with which stock trades are settled. This change, called T+1, is intended to reduce risks and improve efficiency. But what is the position of the rest of the world on this matter? Let’s take a closer look.
Why faster settlement is important:
When you buy or sell shares, the settlement process is how the transaction is finalized. In the US, this usually takes two business days after the operation. But now, the Securities and Exchange Commission (SEC) is shortening this to just one day, starting May 28, 2024. This measure, known as T+1, aims to make things faster and safer for investors and the markets.
Comparison with other countries:
United States, Canada and Mexico:
The United States is not alone in this change. Canada and Mexico are also moving toward a one-day agreement, with their change coming one day earlier than in the United States, starting on May 27.
European Union (EU):
In Europe, they are considering following the United States’ example, but have not yet set a timetable. They are studying the pros and cons and plan to make a decision later this year. However, experts believe this could be more complicated due to how stock trading works in different European countries.
United Kingdom (United Kingdom):
The United Kingdom is also considering accelerating its settlement process. They are studying the benefits and challenges and hope to make a decision between 2025 and 2026. Reports on this will be published soon.
Asia:
In India, transactions are already settled one day after the transaction and your goal is to settle them on the same day the next. China is leading the way with same-day and next-day cash and stock settlements. Most other Asian markets are watching and waiting to see how things go before making changes themselves.
Conclusion:
The United States is leading the way in making stock settlement faster and safer. Other countries are taking note and making their own plans. As the world moves towards faster settlements, investors and markets can expect to see benefits in terms of efficiency and risk reduction.
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