Effective Tuesday, May 28, 2024, the U.S. Securities and Exchange Commission (SEC) will implement a shortened T+1 settlement cycle for transactions in U.S. securities that settle through DTC. These changes reflect the SEC’s amendments to Rule 15c6-1 under the Securities Exchange Act of 1934 (“Exchange Act”). The SEC Fact Sheet provides more information on the new and amended rules.
What Does This Mean For You?
Under the current T+2 settlement cycle, if you buy a security such as a stock or bond, William Blair must receive payment from you no later than two business days after the trade is executed. When you sell a security, you must deliver your security to William Blair no later than two business days after the sale. For example, if you sold shares of a stock on Tuesday, the transaction would settle on Thursday.
Under the new T+1 settlement cycle, most securities transactions will settle on the next business day following their transaction date and your payment or delivery of security must be delivered to William Blair on that day. Using the example from above, if you sell shares of a stock on Tuesday, the transaction will now settle on Wednesday. You can view a complete list of products impacted by T+1 on the DTCC website.
Cash Considerations
If you normally keep minimal cash balances (see Cash Balances section below) in your account, this may impact the ability to pay for trades. If your account doesn’t maintain a cash balance equal to or greater than the cost of the trade, interest may be charged to your account.
If you historically initiated an Automated Clearing House (ACH) payment for your purchases the day after your trade was executed (e.g., you waited for trade confirmation before sending money from a linked bank account), you’ll likely need to initiate ACH payments a day earlier (i.e., on the day of the trade) to ensure the payment has posted by the next day (i.e., the settlement date). Please note that simply initiating an ACH transaction does not meet payment requirements; the funds must be deposited in your account. If the payment is not received by settlement date, your account may incur interest charges.
Cash Balances
Settlement needs can be met by cash held in the Bank Deposit Sweep Program—our core account seep option—or via select Fidelity money market funds.
How is William Blair preparing?
William Blair has assessed its current operational processes and technology solutions to ensure readiness for the T+1 transition. As part of this, we are regularly reviewing allocation and affirmation timeliness metrics and actively participating in the end-to-end testing framework developed by DTCC to ensure that functionality for all parts of the trade lifecycle is being evaluated.
Should you have any questions on settlements at William Blair, please reach out to your Financial Advisor.