Starting on May 28, US trades will "settle," or complete the exchange of dollars for stock, in one day rather than two

Starting on May 28, US trades will "settle," or complete the exchange of dollars for stock, in one day rather than two, per Bloomberg.

4. Why is collateral necessary?
   Brokers must provide collateral, also known as margin, to a fund held by the Depository Trust & Clearing Corp., which serves as the modern Wall Street clearinghouse for stock trades. This requirement protects both sides of a trade in case one party defaults or fails to fulfill its commitment.
5. What are the advantages of T+1?
   The SEC has stated that a shorter settlement window reduces the risk of default by buyers or sellers before a transaction is completed. This leads to lower margin requirements for brokers and reduces the likelihood of brokers needing to restrict trades due to high volumes or volatility. (US Treasuries and mutual funds already settle at T+1.)
6. What are the challenges for T+1 in the US?
   The SEC has also noted that T+1 could increase some operational risks. Commissioner Mark Uyeda mentioned that accelerating settlements would leave less time for participants to rectify transaction errors or for regulators to prevent potential frauds, among other challenges.
7. How does T+1 affect the global market?
   Reducing the time to settle equity transactions in the US will put US stocks out of sync with the global currency exchange market, which typically takes two days to complete. Many overseas institutions buying US assets will need to secure dollars in advance to ensure they have them in time for a transaction. Failure to do so could result in some purchases falling through. The European Fund and Asset Management Association has warned that a faster US settlement cycle could put as much as $70 billion of daily currency trading at risk.

Brokers and investors in Asia face time constraints to execute trades before the US market closes and meet the industry’s 9 p.m. New York time deadline for trade “affirmation,” the final step before settlement. FX liquidity decreases in the US afternoon, when other markets are closed.

8. Why not move to T+0?
   SEC Chair Gary Gensler has suggested that modern technology could allow for same-day settlement (T+0 or T+evening), further reducing the risk of default before settlement. However, the Securities Industry and Financial Markets Association (Sifma) argues that this change would require costly modifications to market operations and could result in more failed trades and fraud due to less time to fix settlement instructions or spot compliance issues.
9. What is the industry's response to the transition to T+1?
   Financial trade groups like the Investment Company Institute state that their industry is prepared for the transition. While many trade associations and asset managers requested until September to make the changes, the SEC has not indicated a change to the May deadline. Sifma has emphasized that rushing implementation without a clear reason could add risk, as the industry, not regulators, is responsible for shortening the settlement cycle.
10. Are other countries adopting T+1?
    Yes. India already operates on T+1, and regulators have approved a soft launch of same-day settlement in 25 stocks. China's markets use a mix of same-day to T+2 settlement speeds. Canada and Mexico are set to transition to T+1 in May. The UK plans to move to T+1 by the end of 2027. The US is encouraging the European Union to align with T+1, and the EU's financial regulation chief has indicated that the bloc will make the move. Australia is also considering a shift to T+1.