Greg Kilminster
Head of Product - Content
FINRA adopts T+1 settlement cycle amendments
The Financial Industry Regulatory Authority (FINRA) has adopted amendments to align its rules with the Securities and Exchange Commission’s (SEC) decision, in February 2023, to shorten the standard settlement cycle for most US securities transactions from T+2 to T+1.
Additionally, FINRA has adopted new rules to improve the accessibility of order routing disclosures for National Market System (NMS) securities.
The adopted amendments will come into effect on 28 May 2024, which is the compliance date the SEC announced for amended Rule 15c6-1 and new Rule 15c6-2.
To help firms prepare for the transition to the shortened settlement cycle, FINRA has taken several measures, including encouraging all firms to participate in the industry’s T+1 testing program. This program enables firms to test for the entire trade life cycle, including trade affirmation, confirmation, clearance, settlement, and trade exception flows. FINRA also recommends that firms test with the appropriate testing facilities for the changes to transaction reporting and the change from 2:30 p.m. ET to noon ET for when match-eligible clearing trades are automatically locked in and submitted to DTCC.
In addition, FINRA has referred firms to related technical notices that provide further guidance on the new rules.
Accessibility of order routing disclosures for NMS securities
FINRA has adopted new Rule 6151 (Disclosure of Order Routing Information for NMS Securities), which requires members to submit to FINRA for centralised publication the order routing reports mandated by SEC Rule 606(a) (Rule 606(a) Reports).
This rule mandates that broker-dealers publicly disclose specified information about their order routing practices for NMS securities quarterly. Broker-dealers must make specified order handling disclosures available on a free and public website for at least three years, which include information about the venues to which non-directed customer orders in NMS securities are routed and the nature of any relationship the broker-dealer may have with each venue.
These disclosures must be published within one month after the end of the quarter the report covers.
These amendments will be effective from 30 June 2024. Members will have to submit their Q2 2024 Rule 606(a) Reports to FINRA no later than 31 July 2024.
Click here to read the full RegInsight on CUBE’s RegPlatform