Beginning on Tuesday, May 28, 2024, the financial services industry will have faster settlement of securities.  On that day, all trades that would normally settle Trade plus two days (“T+2”) will settle Trade plus one day (“T+1”).  On February 15, 2023, the U.S. Securities and Exchange Commission ("SEC") adopted a final rule that would reduce the settlement cycle for most transactions from a T+2 cycle (i.e., trade date plus two business days) to a T+1 cycle.  This isn’t the first time securities settlement was amended.  Back in 2017, the SEC shortened the settlement cycle from T+3 to T+2. The SEC determined that improvements in current technology allowed for the financial services industry to again advance the settlement cycle to T+1.

The major impact is that when selling a security, your funds will be available faster.  Also, if you purchase a security, you will be required to fund your account quicker. This change will affect equities, corporate and municipal bonds as well as most other securities that currently settle T+2.

Things to Consider:

Cash funding - Ensuring your accounts have enough cash to cover any purchases.

• Funding will need to take place in a shorter time period to ensure proper cash and liquidity management.
  • Consider linking your bank to your brokerage account (ACH form): With the shorter settlement coming, there could be instances in which you need to bring in funds to cover purchased trades.  The ACH system is a secure and quick method to send and receive funds in your account(s).
• Consider whether collateral and margin requirements will need to cover potential purchases (in non-retirement accounts only)

• You may wish to consider adding a margin agreement to your account in cases where cash funding may be delayed.
  • Like overdraft protection, there is no cost to having a margin agreement in place. You are only charged in cases where you need to borrow against your investments.
  • Margin is generally considered in cases where there is a short-term borrowing need (other options are available for your long-term borrowing needs, where applicable). Margin may not be appropriate for everyone. For more information on margin and current margin rates, please reference your Customer Information Brochure, and speak with your Financial Professional.

Stock Lending – Under T+1 stock lenders have less time to recall the loaned securities and the borrowers will have less time to return them.

International Settlement Cycles – Consider that other markets may remain on T+2.

• If you are purchasing a security in a non-U.S. market, consider the potential impact of settlement, as other markets may remain on a T+2 cycle (until they update to the new standard).

Corporate Actions – In the T+1 requirement, ex-date and record date will be the same.

Paper Certificates – While rare now, if you have a physical/paper certificate for a security, you might need to deliver it to HilltopSecurities quicker in order to meet the shorter settlement cycle.

Speak to your Financial Professional:

For more information about the conversion to T+1 settlement, how to establish ACH instructions or margin on your account(s), or how to get online access to your account, please contact your Financial Professional.

More Information (External):

You can also find more information about the latest developments by visiting the following sites:

DTCC T+1 website (https://www.dtcc.com/ust1).

DTCC FAQs Frequently Asked Questions (https://www.dtcc.com/ust1/faqs).

The SEC (https://www.sec.gov).

SIFMA Article: “Accelerating the U.S. Securities Settlement Cycle to T+1” – December 2021 Securities settlement.  (https://www.sifma.org/resources/general/accelerating-the-u-s-securities-settlement-cycle-to-t1/).

SIFMA - T+1 Securities Settlement Industry Implementation Playbook.   (https://www.sifma.org/resources/general/t1-playbook/).

Other Countries:

Canada - The Canadian Securities Administrators (“CSA”) are expected to approve a similar settlement standard to be effective on May 27, 2024.  This will be facilitated by the Canadian Capital Markets Association (“CCMA”).

Mexico - The Contraparte Central de Valores (“CCV”) and Mexican Association of Brokerage Firms (“AMIB”) are seeking approval for Mexico to shorten their settlement period to T+1.

Other Countries - Financial/Securities industry groups in many other countries are considering shortening their settlement periods to reflect the American model.

With The Short Settlement Cycle, Consider eDelivery:

eDelivery is the secure, convenient way for you to receive and manage your important documents from Hilltop Securities, including account statements, tax documents, and more. eDelivery gives you the benefit of same day trade confirmations, instead of waiting for them to come in the mail. Additional benefits are:

• Faster delivery of your documents.
• 24/7 access to your documents online.
• Enhanced security of your documents.
• The ability to easily store, search, and share your documents.

To enroll in eDelivery:

• Establish a MOmentum Client login ID by self-registering on HilltopSecurities’ website.
• Once logged into MOmentum Client, click the Menu icon at the top left of the page. (Note: You must log in through a web browser, not our MOmentum Mobile App.)
• Expand the ‘Tools’ dropdown and select ‘Paperless Preferences’.
• Check the box of the account number(s) you wish to enroll, enter your email address and select ‘EMAIL’ for your Document Type.
• To see all document types available for enrollment, use the scroll bar at the bottom of your screen.
• Save your preferences and then you are done!

If you have any questions or need assistance with online access or eDelivery, please contact the Client Partners Team at 1-888-658-9165