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Illustration: Shoshana Gordon/Axios

The machinery of U.S. markets is — eventually — going to move a lot more quickly, with settlement times getting slashed in half from two days to one day. But it's going to take a while to get there.

Why it matters: The current plan is for the new settlement cycle to go live in the first half of 2024.

The big picture: Currently, most capital-markets transactions, like buying stocks or even converting currency, settle on a T+2 basis. If the exchange is agreed on a Monday, then the seller receives the cash the following Wednesday.

Driving the news: The most important industry bodies just agreed to reduce that settlement time to T+1 — meaning that if you enter into a contract to sell a stock on Monday, you'll receive the money on Tuesday.

Between the lines: Getting there from here won't be easy. After all, it took about five years, from 2012 to 2017, to move to T+2 from T+3.

What's next: Eventually, the agencies anticipate a move from T+1 to T+0.5, with trades settling the same day, although there's no timetable for that.

What's not next: Real-time settlement, as proposed by Robinhood, is unlikely to happen in the foreseeable future. It would require extremely expensive and unnecessary changes to almost all market infrastructure, including repo, prime brokerage, and funding requirements for retail investors.

Be smart: Real-time settlement would destroy most of the current benefits of securities netting, where Wall Street firms only transfer the small net amount owed at the end of the day, rather than the enormous gross amount owed.

Flashback: Robinhood was forced to restrict trade in meme stocks like GameStop in February, and put up $3 billion in cash, in large part because of the way the current T+2 system is structured. A move to T+1 would cut those collateral calls in half.

The bottom line: A glance at the 169-page "implementation playbook" for the move to T+2 in 2017 gives a hint of the complexities involved in this change. The move to T+1 is in many ways even gnarlier.

Go deeper

Boys Scouts of America sex abuse survivors reject $2.7 billion settlement

Photo: Tom Pennington/Getty Images

Irving-based Boy Scouts of America failed to reach a financial settlement with tens of thousands of alleged sex abuse victims, after not enough survivors voted to approve a $2.7 billion offer.

Why it matters: Parties to the proposed settlement, which includes religious organizations, insurance companies and attorneys representing victims, will likely have to start a new round of negotiations with BSA.

Why the Fed might want to jolt the markets

Fed chair Jerome Powell at a hearing earlier this month. Photo: Brendan Smialowski-Pool/Getty Images

So far, financial markets are cooperating nicely with the Federal Reserve's efforts to restrain inflation. They're doing the Fed's work for it by creating tighter financial conditions, in a distinctly non-panicky way.

  • But as the central bank's policymakers meet this week, an underlying question they face is whether the adjustment is happening too slowly.
Kate Marino, author of Markets
2 hours ago - Economy & Business

Omicron outbreaks were bad for business in January

Data: New York Federal Reserve Bank; Chart: Axios Visuals

Emerging anecdotal evidence shows just how hard the recent rise in COVID-19 cases hit businesses in early January — but that hasn't hurt some business leaders’ longer-term views of their companies' prospects.

Why it matters: Increasingly, the economic recovery has come in fits and starts that move in tandem with new peaks in cases. Look no further than the thousands of canceled flights and shuttered Broadway theaters in the wake of the Omicron variant's spread over the last few months.