March 22, 2017 / 2:02 PM / 5 months ago

U.S. SEC to shorten settlement cycle for securities trades

WASHINGTON, March 22 (Reuters) - U.S. securities regulators will take steps on Wednesday to modernize antiquated regulations that require stock and bond trades to settle within three business days, a step the industry has urged the government to take for years.

The Securities and Exchange Commission is expected to vote later Wednesday morning to shorten that settlement cycle timeframe to two business days from three, a change that aims to reduce credit and market risk.

Modern technology lets investors make trades in a matter of milliseconds. But since 1993, the SEC's rules have required brokers to wait for three business days between the time an investor's order is executed, to when the cash and ownership of the security are exchanged.

Wall Street trade groups have strongly backed reforms to shorten the settlement cycle, saying it will decrease counterparty risks, bolster financial stability and align with many other international markets that have already adopted a two-day securities settlement cycle.

Consumer groups also support the change, though some have argued the settlement time should be reduced even further to just one day.

Once adopted, the rule is slated to take effect on Sept. 5. (Reporting by Sarah N. Lynch; Editing by Nick Zieminski)

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