US Equities recently changed from T+3 to T+2:
https://www.sec.gov/news/press-release/2017-68-0
There are many types of securities that are already settling at T+0.
It’s Time for Real Time Settlement
11–20 of 445 posts
Re: It’s Time for Real Time Settlement
#12Earlier quoted context omitted.
How come I know for sure this will fail?
Probably blockchain
They could mitigate by using a quantity of ML and mix in some good old-fashioned Big Data.
As a side note, we need a defined unit for the quantity of hiptech in a software project. I propose one AI (= 100 Microservices).
Re: It’s Time for Real Time Settlement
#13I don’t even know what to say about this. It doesn’t sound like he learned his lessons at all. He’s calling for real-time settlement which is not practical for equities. On top of that he completely dismissed RH’s root problems: very loose margins and new account standards. I was defending RH on HN last week but I have to reconsider.
Why is it not practical?
Re: It’s Time for Real Time Settlement
#14Wouldn't real-time settlement have completely destroyed RH last week? How would they have funded trading?
Re: It’s Time for Real Time Settlement
#15I don’t even know what to say about this. It doesn’t sound like he learned his lessons at all. He’s calling for real-time settlement which is not practical for equities. On top of that he completely dismissed RH’s root problems: very loose margins and new account standards. I was defending RH on HN last week but I have to reconsider.
dumb question, why is not practical? As for the root problems, those are not related to the issue from last week (not sure if you're aware, but margin had no factor in play with the DTCC requirements).
There are many reasons but most importantly, delayed settlement serves as fraud deterrent and error/exception handling. Should be T+1 same as options. Think of it as a database, do you want instantaneous non-reversible commits by default when transactions number in the billions with known error rate? Or perhaps have a reasonable buffer for safety?
Re: It’s Time for Real Time Settlement
#16It's a good thing that DTCC aware of this issue and is looking into accelerating this to T+1 (followed by T+0) using blockchain and distributed ledgers. https://www.finextra.com/finextra-downloads/newsdocs/embraci... Edit: No clue why this is downvoted.
Why is blockchain involved?
Re: It’s Time for Real Time Settlement
#17US Equities recently changed from T+3 to T+2: https://www.sec.gov/news/press-release/2017-68-0 There are many types of securities that are already settling at T+0.
What does T+0 mean? Instantly or same day?
Re: It’s Time for Real Time Settlement
#18Wouldn't real-time settlement have completely destroyed RH last week? How would they have funded trading?
Real time securities wouldn't need brokerages to front collateral while the trades settle by the virtue of no settling period. They would only have to deal with customer capital used to buy the stock.
Re: It’s Time for Real Time Settlement
#19Out of curiosity, are there any reasons to prefer slower settlement? (Since this seems like a no-brainer, but clearly hasn’t happened already)
Some ability to net—that is to buy at one price, sell at another, and only settle the difference—is probably desirable
Re: It’s Time for Real Time Settlement
#20Wouldn't real-time settlement have completely destroyed RH last week? How would they have funded trading?
Real time securities wouldn't need brokerages to front collateral while the trades settle by the virtue of no settling period. They would only have to deal with customer capital used to buy the stock.
Wasn't a big part of this issue fueled by RH fronting the money for trades when the customer was transferring money into their account from a bank over ACH? Making ACH instant (which I believe is in the works) would solve that, not T+0 for settlement.
(I don't have a good feel for what was the bigger driver of RH's issues though: overextension because of slow ACH or slow trade settlement.)