[ANALYSIS] Migration to stock market's T+2 new settlement cycle

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The Securities and Exchange Commission also approves a two-week transition period where the applicable settlement deadlines are extended by one hour from August 29 to September 11

of all trading transactions of member brokerage houses to the so-called T+2 settlement cycle.

In the US, the T+2 settlement cycle was formally adopted in 2017 when the US SEC on March 22, 2017 amended Exchange Act Rule 15c6-1to shorten the standard settlement cycle to T+2.For the information of the general reading public, “settlement” simply means the formal transfer of the stocks to the buyer and receipt of payment of said sold stocks to the seller. And the period of time by which the transaction is to be consummated is called the “settlement cycle.

Similarly, if you are buying, you need to pay for your stock transactions one business day earlier. And if you are trading on margin, you have to work out the specific arrangements with your stockbroker.From what I can remember, our settlement process before this new T+2 cycle policy has always been under the T+3 settlement cycle.

If you will notice in the above days of settlements, the first T+2 transactions were completed after three days. Under the T+2 cycle rule, their settlements should fall on August 28, Monday. This could not be done, however, because August 28 was a national holiday. It was National Heroes Day. In the last two weeks the market has been moving sideways to downward. When it closed last Friday, August 24, which was the first day of bourse’s migration plan to the T+2 cycle, the PSEi precariously hanged by some 60.61 points only above its technical immediate support – at the same time breakdown – point of 6,100.

 

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