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
  • 1
    While an interesting question, this doesn't strike me as a personal finance. – Chris W. Rea Feb 13 at 22:19

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.

| improve this answer | |
  • That last sentence is interesting... what made it rise up so steeply 50 years ago? – Michael Feb 14 at 0:06
  • 2
    @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

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.