The Case for T+1: The Argument and the Results

Updated October 2026, with results since T+1 took effect. First published February 2024.

The SEC's argument for T+1 was about the gap between trade date and settlement. Every unsettled trade is an exposure the clearinghouse has to cover with margin, and the clearinghouse asks for the most margin exactly when markets are worst. The SEC said its decision was "in part informed by episodes in 2020 and 2021 of increased market volatility that highlighted potential vulnerabilities in the U.S. securities market" (Release No. 34-96930). This post covers what happened in January 2021, what the SEC expected a shorter cycle to change, and what the numbers show since May 28, 2024.

January 2021: The Margin Calls

The SEC staff report on early 2021 market conditions, published October 14, 2021, has the numbers. On January 27, 2021, NSCC made intraday margin calls on 36 clearing members totaling $6.9 billion, which brought required margin across all members to $25.5 billion. Of the $6.9 billion, $2.1 billion was intraday mark-to-market. The other $4.8 billion was a special charge NSCC assessed on 18 members because of unusual volatility in GameStop and other names.

The next day, NSCC used its discretion to waive its excess capital premium charge for all members. Without that waiver, the staff report says, one retail broker-dealer would have faced an extra charge of more than double its $1.4 billion margin requirement on January 28. NSCC removed the waiver on February 2.

Some brokers with mostly individual-investor customers restricted trading in GameStop and other stocks that week. The staff report notes that NSCC's rules don't let it tell members to stop trading. The brokers decided that themselves, and some said the restrictions were a reaction to NSCC's margin calls and capital charges. The report's first observation ends with the step the SEC later took: "One method to mitigate the systemic risk posed by such entities to the clearinghouse and other participants is to shorten the settlement cycle."

The Argument in the Adopting Release

The SEC adopted T+1 on February 15, 2023. The release makes four arguments that matter to a broker-dealer.

With one day of unsettled trades instead of two, the clearinghouse has less exposure to its members and can require smaller financial resources from them.
In periods of market stress, intraday margin calls "can produce procyclical effects that reduce overall market liquidity." A shorter cycle cuts the clearinghouse's exposure and so limits that effect.
A 2012 Boston Consulting Group study estimated that moving from T+3 to T+2 would cut clearing fund costs by $25 million a year. The SEC expected more from T+2 to T+1 for two reasons. Average daily U.S. equity trading volume more than doubled between 2011 and 2021, and price volatility grows with time at a decreasing rate, so removing the second day takes out more volatility than removing the third did.
Mutual fund shares already settled on T+1 while the securities in the portfolio settled on T+2. Funds paid redeeming shareholders a day before they got cash from their own sales, and some held extra cash or credit lines to cover the gap.

Then-Chair Gary Gensler said in the adoption press release that he supported the rule "because it will reduce latency, lower risk, and promote efficiency." The SEC also considered same-day settlement and declined to adopt it; our post on T+0 covers why.

What the Numbers Show Since May 28, 2024

Two days after go-live, DTCC reported that the NSCC Clearing Fund had fallen $3.7 billion, or 29%, to $9.1 billion, against the prior quarter's average of $12.8 billion. The September 2024 T+1 After Action Report from SIFMA, ICI, and DTCC used a longer window and a smaller number. It put the average fund under T+1 at $9.8 billion, down $3.0 billion (23%) from the three-month T+2 average and down $2.4 billion (20%) from the last T+2 month.

Fails stayed at T+2 levels. The continuous net settlement (CNS) fail rate was 1.90% on May 29, 2024, against a May average of 2.01% under T+2. By July 2024 it averaged 2.12%, and the DTC fail rate for trades outside CNS averaged 3.31%. The report calls both "consistent with T+2 settlement." Same-day affirmation, which the shorter cycle depended on, went from 73% in January 2024 to nearly 95%. What actually happened in go-live week has the figures for May 29.

What the Numbers Don't Show

The published figures cover the first few months after go-live, and they come from DTCC and the industry groups that ran the migration. None of them measures another January 2021. How much smaller the margin calls would be in a real squeeze is still the SEC's projection. Nobody has measured it yet.

The cost of settlement also moved. Work that used to happen on the morning after trade date now happens on trade-date evening, with a 9:00 p.m. ET affirmation cutoff and the DTC night cycle at about 11:30 p.m. The after-action report also describes friction with markets still on T+2, such as the UK and the EU, and with FX settlement through CLS, whose 6:00 p.m. ET daily cutoff stayed where it was. The operations desk after T+1 covers what that evening looks like.

In our view the case for T+1 has held up: about $3 billion less margin at NSCC on average, with fail rates where they were. If you're making the case inside your firm for more automation on trade date, the clearing fund numbers are the strongest argument you have. The margin saving depends on trades actually settling on T+1. Each fail keeps a position open past settlement date, which is the exposure the shorter cycle was meant to remove.

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.