According to media reports, the United States is encouraging countries like the UK to shorten the settlement time for currency transactions to align with the “T+1” settlement era led by US stocks.
On Thursday (June 20), local time, Gary Gensler, Chairman of the US Securities and Exchange Commission (SEC), participated online in the “UK Accelerated Settlement Conference” held in London, delivering a keynote speech and engaging in a brief Q&A session.
Just a month ago, the US stock market reduced its settlement cycle from T+2 to T+1. This means that investors can receive settlement funds for stocks sold on the same day within one working day after the transaction.
The SEC stated at the time that a shorter settlement window reduces margin requirements for brokers and lowers risks associated with high trading volumes or volatility.
It’s worth noting that prior to this, the T+1 rule already applied to bonds, options, and ETFs, indicating an expanding application of T+1 in the US financial markets.
Gensler highlighted in his speech that the transition to T+1 in the US has been generally successful, reducing margin requirements at clearinghouses by approximately $3 billion, or about 25%.
He emphasized that faster settlement reduces risks, enhances liquidity, and strengthens the market’s ability to withstand systemic pressures.
In addition to the US stock market’s adoption of T+1, Canada, Mexico, and Argentina have also shifted to T+1 settlement. In March of this year, India even began experimenting with a T+0 settlement system.
The UK Treasury has also called for following the US example, aiming to transition to T+1 by the end of 2027. Hence, the “UK Accelerated Settlement Conference” was convened to debate this topic.
Gensler suggested in his speech that the UK should take broader steps to shorten settlement times for more asset classes.
However, these changes may pose significant challenges for global forex traders, as most forex transactions still operate on a T+2 delivery basis.
In response to this, Gensler stated, “We should now begin discussions with central banks around the world about the possibility of shortening currency settlement cycles.”
