The U.S. stock market has accelerated its settlement process, moving from the traditional T+2 settlement cycle (trade date plus two days) to a T+1 cycle (trade date plus one day)

Now, transactions will be finalized the day after the sale. This new system applies to stocks, bonds, exchange-traded funds, real estate investment trusts, municipal securities, and limited partnerships traded on U.S. exchanges. There are specific details regarding the types of settlements and the relationships between securities owners and brokers. With T+1, the risk of counterparty default and vulnerability to price fluctuations should decrease, while capital and resource efficiency should improve.

However, there are downsides. According to a Bloomberg Intelligence report, the shift to T+1 could cost investors approximately $30 billion: $24 billion in securities lending expenses and $6 billion in additional costs for investors in currency markets. The shorter settlement cycle shifts costs from banks and clearinghouses to institutional investors, increasing operational pressure. This could lead to information leakage due to the premature recall of loaned shares and a potential increase in failed trades.

A century ago, the U.S. already had a T+1 rule, but the increase in transaction volumes made quick manual management impossible, leading to a five-day settlement period. In 1987, after the stock market crash, it became clear that this period was too long, prompting a reduction to three days. In 2017, the settlement period was further reduced to two days, establishing the T+2 rule.