The world of investing has just undergone a major transformation, as a new SEC rule has changed the game for traders everywhere. The rule, known as T+1, requires stock trades to be finalized within 24 hours of being placed, a significant shift from the previous T+3 settlement period.
This new rule not only applies to stocks but also extends to corporate and municipal bonds, ETFs, and some mutual funds. The US is not alone in this change, as both Canada and Mexico have also adopted a T+1 transaction cycle.
For the average investor, the implementation of the rule may not drastically alter their investing process. However, there could be some initial hiccups as investors, brokerages, and Wall Street adjust to the new timeline. Wednesday is expected to be a particularly chaotic day as trades from the past two days (T+2) need to be settled alongside the new T+1 trades.
SEC Chair Gary Gensler believes that the new rule will make the market more resilient, timely, and orderly. While some companies have been preparing for this shift for months, others may face challenges in adapting to the new system.
Overall, the move to a T+1 settlement period marks a significant milestone in the evolution of investing, as technology and market dynamics continue to shape the way we trade stocks and securities. Investors and industry players alike will need to navigate this new landscape as they adjust to the changes brought about by the SEC’s latest rule.
