T+1 sets up headache for cross-currency trades

In February, the Securities and Exchange Commission (SEC) adopted rule changes to shorten the standard settlement cycle for most broker-dealer transactions in securities from two business days after the trade date (T+2) to one (T+1). The compliance date for the final rules is May 28, 2024.

While the merits of this move have been widely debated, one aspect that has received relatively little attention is currency conversion. BBH’s European custody product manager, Derek Coyle, has previously pointed out that a shorter settlement cycle impacts cross-currency transactions which have an FX component, with FX trades either needing to be booked on the same day or pre-funded.