What Clearing Firms Need From Introducing Brokers Under T+1

Updated October 2026. First published May 2024.

The 2024 version of this post told an imagined story about a clearing firm given two weeks to rebuild its operations. Nothing like that happened, and we've removed it. The SEC adopted T+1 on February 15, 2023, and it took effect on May 28, 2024, more than 15 months later. The pressure on clearing firms is daily, and much of it passes straight to the introducing brokers they clear for.

The Clearing Firm's Clock

A clearing firm sits between its correspondents and DTC and NSCC, so its deadlines are the industry's. Institutional trades have to be allocated, confirmed, and affirmed by the end of trade date under Rule 15c6-2, and DTC's affirmation cutoff is 9:00 p.m. ET. Trades settle on T+1. Under Regulation T, a customer has to pay in full within the payment period, which is the standard settlement cycle plus two business days. Under T+2 that was four business days after trade date. It's now three. Every cutoff the clearing firm gives its correspondents has to land before these.

What Clearing Firms Need From Introducing Brokers

A Clear Split of the Work, in Writing

FINRA Rule 4311 requires a carrying agreement to allocate nine functions between the introducing and carrying firms. They include the extension of credit, the receipt and delivery of funds and securities, and the preparation and transmission of confirmations. Rule 15c6-2 added a question for institutional business: which firm is "engaging in the allocation, confirmation, or affirmation process." In the adopting release, the SEC said an executing broker that doesn't take part in that process has no obligation under the rule, and the clearing broker that does take part must comply. If the executing broker takes on part of the work, its arrangements with the clearing broker should identify which firm is engaging in the process. If your carrying agreement predates T+1, look for that sentence. Our post on what an examiner wants to see in a carrying agreement file covers the rest of the agreement.

Allocation Data in Time to Use It

A clearing firm can't affirm what it hasn't received. In 2025, 69.6% of U.S. allocations sent to DTCC's CTM service arrived between 4 p.m. and 7 p.m. ET, according to DTCC's annual report to the SEC. A correspondent whose institutional client allocates at 8:30 p.m. leaves its clearing firm half an hour. Ask your clearing firm for its internal cutoffs in writing, and for a regular report of the trades you sent after them.

Customer Payment, Sooner

When a cash-account customer can't pay within the payment period, the creditor can apply to its examining authority for an extension. Under 12 CFR 220.8(d)(2), the application has to be filed and acted on before the payment period ends. In a fully disclosed arrangement where the clearing firm extends the credit, the clearing firm is the one filing, and it depends on the introducing broker to tell it a customer is late. With one less day in the payment period, a late call from the branch can mean a missed window. Our post on free-riding and the Regulation T payment period covers the rule.

Clean Data for DVP Accounts

When a client pays for trades through a custodian that's another broker-dealer, someone has to send that custodian a Letter of Free Funds. The SEC staff addressed who in its 2003 no-action letter to Loffa: "When the executing broker is not self-clearing, the broker-dealer that clears and settles the trade would make the request." The letter depends on data the introducing broker owns: the custodian on the settlement instructions, the account, and whether the account is documented prime brokerage. With one day to get an answer, a wrong custodian on the instructions is close to a guaranteed delay.

Records for Fails and Close-Outs

Under Regulation SHO Rule 204, the close-out obligation for a fail to deliver falls on the participant of the registered clearing agency, which for an introducing broker's trades is the clearing firm. The deadlines moved with the settlement date. A fail from a long sale gets more time, but only if the participant can demonstrate on its books and records that the fail resulted from a long sale. For an introducing broker's customer, those records start with the introducing broker. Our post on Rule 204 close-outs under T+1 covers the timing.

What to Ask Your Clearing Firm

Its internal cutoffs for trade data, allocations, customer payment, and extension requests, in writing.
A daily or weekly report of your late items: allocations after cutoff, unaffirmed trades, Regulation T extensions, and fails.
Which firm your agreement names as engaging in the allocation, confirmation, and affirmation process.
Whether the drop in NSCC margin changed what you pay. The clearing fund fell an average of $3.0 billion (23%) after go-live, according to the T+1 After Action Report. The SEC said clearing members may pass lower margin through as lower fees. Whether yours did is a commercial question.

This post is for informational purposes only and does not constitute legal advice. For guidance on specific regulatory obligations, consult your counsel or compliance advisor.