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Is it possible to have same day settlement on the stock markets by using more efficient processes and technology?

I know that the T+3 settlement was earlier replaced by the T+2 settlement process. Can we improve it further to settle stocks the same day? And if yes, what are the challenges and problems that need to be addressed?

  • For that matter, why not settle instantly? – Michael Feb 13 at 20:42
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    While an interesting question, this doesn't strike me as a personal finance. – Chris W. Rea Feb 13 at 22:19
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Some firms are already pushing toward T+0.

At one broker, when users trade with other in house accounts, settlement is T+0.

Another broker offers T+1 settlement on some stocks so that when assigned on a covered call, one can buy new shares at current price, avoiding an assignment on the original shares which have a large capital gainand would therefore incur a larger tax bite.

Nearly 100 years ago, stock settlement was T+1 and rose to as much as T+5 some fifty years ago. T+1 might be feasible again.

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  • That last sentence is interesting... what made it rise up so steeply 50 years ago? – Michael Feb 14 at 0:06
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    @Michael See: jpkoning.blogspot.com/2017/09/… – Morrison Chang Feb 14 at 0:21
  • @MorrisonChang But don't the benefits outweigh the costs right now with all the advancements in technology? As mentioned in the post, Moscow used to have T+0 day settlement earlier, which means technology or cost is not the bottleneck here. So why haven't we already shifted yet? I would like to highlight one of the comment from the above post here: What work? Are physical stock certificates involved at some level? Isn't this all electronic? – Sudeep Feb 15 at 15:37
  • @Sundeep Institutional processes have built up around existing rules which means change becomes harder. In the US brokers only moved to T+2 in 2017 from T+3 which was enacted in 1995, so T+2 is already taking advantage of "paperless work". The settlement systems are mostly operating in batch mode working overnight between trading days. T+0 means processing during the day which isn't what the systems are designed for and would need change($$). See What exactly happens during a settlement period? for more detail. – Morrison Chang Feb 15 at 20:36

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