(Bloomberg) — The head of the Securities and Exchange Commission is encouraging the UK and others to shorten the settlement time for currency trading to better align their markets with those in Asia and North America.
The UK is debating a transition to next-day settlement, known as T+1, for securities transactions, with its Treasury calling for the shift by the end of 2027. But SEC Chair Gary Gensler is nudging the UK to go bigger by adding more asset classes for shorter settlement.
The US, Canada, Mexico and other countries already pressed ahead. In late May, they made the transition to halve the settlement time for securities from the current T+2 cycle.
The shift has placed significant pressure on global currency traders, particularly those in the UK, who turned to a variety of measures to juggle trading across time zones and countries to meet the new requirements for the US market.
“We should start to engage now in conversations, along with central banks, about the possibility of shortening the currency trading settlement cycle,” Gensler said in a speech Thursday at a UK conference on accelerated settlement.
That transition in the US was largely successful, lowering the amount of margin required to be posted at clearinghouses in case of financial instability by about $3 billion, or about 25%, he said. Faster settlement lowers risk, boosts liquidity and bolsters the ability for markets to weather systemic stress, Gensler said.
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