Update those systems to reflect new securities transaction settlement dates, FDIC advises

Banks should update their systems to reflect the new settlement date for most broker-dealer securities transactions to one day, from the current two days, reflecting new rules adopted by the federal regulator of securities, the federal bank deposit insurance agency said Thursday.

The new settlement requirement becomes effective in a little more than a year.

The Federal Deposit Insurance Corp. (FDIC) said the shortened standard settlement cycle for most broker-dealer transactions emanated from the Securities and Exchange Commission’s (SEC) rule that has a compliance date of May 28, 2024. The regulation changes the settlement cycle for most of the transactions from two business days after the trade date (‘‘T+2’’) to one business day after the trade date (‘‘T+1’’), the FDIC said.

The FDIC Act requires that insured banks must determine the number of business days in the standard settlement cycle by reference to SEC Rule 15c6-1, 17 CFR 240.15c6-1, which is the settlement cycle applicable to registered broker dealers. Under most circumstances, the number of business days in the “standard settlement cycle followed by registered broker dealers in the United States” is that specified by the SEC, unless otherwise agreed to by the parties at the time of the transaction, the FDIC said.

“FDIC-supervised institutions are advised to update their systems, operations, and processes to facilitate an orderly transition to a T+1 settlement cycle” by May 28 next year, the FDIC said.

FDIC FIL-21-2023: Securities Transaction Settlement Cycle