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Trade Settlement Cycle Reduced to Two Days Effective Sept. 5, 2017

What is T+2 Settlement and How Does it Affect You?

On September 5, 2017, the settlement cycle for stocks, exchange-traded funds (ETFs), municipal and corporate bonds and certain mutual funds will now be trade date plus two business days (T+2) – reduced from T+3.

For HilltopSecurities clients, the shortened cycle means quicker payment and delivery following the sale or purchase of select securities.

Need specifics? The Q&A below explains the reasoning behind T+2 and how it affects you.


What is a settlement cycle and why is it being shortened?

A settlement cycle is the official time it takes to complete the transfer of a security from a seller to a buyer. The trade date – or “T” – is the day a security is sold, and the completed settlement – or “+2” – is the date the buyer and seller would have securities and payment in their possession.

The change was announced in a press release issued by the Securities and Exchange Commission on March 22, 2017, and notes that broker-dealers are required to comply with the amended rule beginning September 5, 2017. According to SEC Acting Chair Michael Piwowar, the current T+3 settlement no longer serves the best interests of investors and the amended rule aims to “increase efficiency and reduce risk for market participants.”

Which securities are affected by the shortened cycle?

The amended rule applies to transactions on stocks, bonds, municipal securities, exchange-traded funds and certain mutual funds.

Is there anything I need to do?

Because of the shortened cycle, you will need to pay for purchased securities a day earlier and ensure you have the necessary funds in your account when making a trade.

To help, HilltopSecurities provides you with free On-Demand Automated Clearing House (ACH) services. Enrolling in On-Demand ACH allows you to send funds between your brokerage and bank accounts overnight when submitted before the cut-off.

Which mutual funds are affected?

The majority of HilltopSecurities’ mutual funds currently settle T+1. Mutual funds that settle T+3 will be subject to the amended rule. However, there may be some exceptions. Check with your HilltopSecurities Financial Advisor for more information.

What about payments needed to cover calls? How will I be notified?

In this specific instance, customer call letters will be discontinued since payment will be required sooner than a letter can be delivered to your mailing address. However, since HilltopSecurities issues calls daily through reports to our offices, your advisor should be aware of your need to cover the payment.


For more information on T+2 Settlement, read “Preparing for the Change to T+2 Settlement” over at the HilltopBlog.


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