Stock trade settlement moves to single day as GameStop mania underscores need for faster transactions

Starting this Tuesday, stock trades and several other securities will need to be settled by the end of the next business day, speeding up the previous two-day process to a "T+1 settlement." This change aims to enhance the efficiency and resilience of market transactions, particularly after the GameStock trading frenzy in 2021 highlighted the need for quicker settlements. For most retail traders, this adjustment will be automatic and seamless, though larger trades might face complexities due to varying international market practices.

The GameStop mania in 2021, characterized by extreme volatility and high trading volumes, significantly impacted the settlement process of trades. Due to the rapid and large fluctuations in stock prices, there was a notable discrepancy between the agreed-upon price at the time of the trade and the market price at the time of settlement56. This discrepancy arose because the settlement process, previously taking two business days (T+2), could not keep pace with the swift changes in stock values5. As a result, the price agreed upon during the trade often differed substantially from the market price when the trade was finally settled, leading to increased occurrences of "failure to deliver," where trades could not be settled as initially agreed5. This situation underscored the need for a faster settlement process to reduce risk and ensure more accurate transaction completion in line with rapidly changing market conditions.