Money For the Rest of Us

Beyond Faster (T+1) Trade Settlements: The Hidden Costs of Optimization

May 29, 2024

Exploring the shift to faster trade settlements from T+2 to T+1, the benefits, costs, and challenges involved. Discussing BlackRock and Franklin launching Treasury funds on the Etherium network. Delving into optimization in blockchain technology and the use of satisficing and rules of thumb to cope with complexity.

27:10

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Quick takeaways

US markets are transitioning to a faster T+1 settlement cycle for trades, improving investor access and market efficiency.

Optimization in financial systems brings benefits like efficiency but risks such as fragility and lack of diversity.

Deep dives

Transition to T+1 Settlement Cycle in US Markets

US markets are transitioning to a faster T+1 settlement cycle for trades, reducing the settlement time from two days to one. This change aims to provide investors quicker access to their funds and enhance market efficiency by decreasing risks associated with longer settlement periods. The move was prompted by challenges faced by brokers during high trading volumes, such as the need for additional collateral due to trade delays, resulting in a congressional investigation and subsequent SEC decision to shorten the settlement window.

Introduction

3min

Insight into the Transition to T+1 Trade Settlements and Associated Challenges

3min

Challenges and Preparations for Faster Trade Settlements

3min

Tokenized Securities and Optimization in Blockchain Technology

9min

Enhancing Accuracy of Large Language Models and Financial Statement Analysis

3min

Balancing AI and Human Analysis in Financial Predictions

10min

Why stock, ETF, and bond trades are optimized to settle in less than a day, allowing investors quicker access to their cash and securities. What are the benefits and costs of optimization in the relentless drive for cheaper, faster, and more profitable.

Why countries are moving to T+1 settlement from T+2 for security trades
What will it take for secur
How BlackRock and Franklin have launched Treasury funds that are tokenized and trade on the Etherium network
How optimization works and what are the tradeoffs
How we can use satisficing and rules of thumb in order to cope with the complexity of the world

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Show Notes

About the ‘T+1’ Rule Making US Stocks Settle in a Day by Lydia Beyoud and Greg Ritchie—Bloomberg

SEC Chair Gensler Statement on Upcoming Implementation of T+1 Settlement Cycle—SEC

What faster trading cycles will mean for US markets by Jennifer Hughes and Harriet Clarfelt—The Financial Times

Speedier Wall Street Trades Are Putting Global Finance On Edge by Greg Ritchie—Bloomberg

BlackRock closes in on crown of world’s largest bitcoin fund by Will Schmitt and Brooke Masters—The Financial Times