Wall Street Reverts To T+1 Settlement, What It Means For Crypto

Wall Street Reverts to T+1 Settlement, Impact on Crypto

Wall Street, the financial hub of the United States, has reverted to the T+1 settlement times, reminiscent of the 1920 era. This change, mandated by the U.S. Securities and Exchange Commission (SEC), has immediate effect.

Historical Context and Shift to T+1 Settlement

The last time trades were settled in a single day was over a century ago. The SEC's new rule, effective May 28, 2024, requires the switch to the T+1 system, which was previously abandoned due to its complexity.

While Wall Street firms have been preparing for the T+1 settlement by adjusting staff schedules, it will require some adjustment. The SEC anticipates "short-term upticks in settlement failures and challenges for a small segment of market participants" during the initial implementation.

Market Efficiency and Crypto Comparison

Despite this move towards faster settlement times, Wall Street still lags behind the crypto market. Cryptocurrencies offer instant settlement, far exceeding the capabilities of traditional stocks.

However, analysts recognize that the SEC's decision to halve the settlement time is a significant step that will gradually align Wall Street's settlement practices with those of crypto.

Impact on Crypto Stocks

Notably, certain crypto stocks, including Coinbase, MicroStrategy, Hut 8, and Marathon Digital, are expected to benefit from the new settlement scheme. The reduced lag time will facilitate faster transaction closures, potentially increasing investor exposure to these companies.

Conclusion

The SEC's recent shift to T+1 settlement overturns the 2017 decision to extend the settlement period to two days. While firms must comply, market observers are monitoring how investors worldwide will navigate the anticipated initial hurdles.

Analysts believe that the traditional financial market may need to adopt the playbook of cryptocurrencies if it desires instantaneous settlements with no time lag.

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