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T+2 Settlement Becomes Mandatory for Most Broker-Dealer Transactions


T+2 Settlement becomes mandatory for most broker-dealer transactions on September 5.   While Rule 15c6-1(d) allows, in connection with firm commitment underwritings, the issuer and underwriters to agree to different settlement cycles, as noted in the SIFMA guidance, SIFMA expects equity offerings, including IPOs, to transition to T+2 settlement cycles.   SIFMA expects debt offerings to continue with current market practice (i.e., either conform to T+2 or to continue with extended settlement cycles as with many high yield issuances).  It may well be that offerings of convertible debt and other equity-linked securities retain, at least in the near term, adherence to the current T+3/T+4 cycle given the documentation process involved with shorter settlement cycles (i.e., typically, drafting of indentures does not start until the deal is launched or priced).

It is recommended that, at the beginning of any underwritten offering process, the parties should agree upon the settlement cycle to be used as that will, of course, affect documentation and process timing.  SIFMA provides some guidance in that regard.

For general T+2 questions, the securities industry has set up a T+2 implementation website.