4 ms·

>Modern databases don't need T+2 to achieve consistency. Ask PayPal or Visa or Alibaba But that's actually not true though, it takes days to settle those trans

>Modern databases don't need T+2 to achieve consistency. Ask PayPal or Visa or Alibaba But that's actually not true though, it takes days to settle those transactions, the payment processors just provide the illusion of instaneousness by smoothing it over with their own fungible cash reserves.

db579 6y ago
It may well be that it does take payment processors t+2 days but I think the point remains that it should not.
- MrMan 6y ago
  The reasons are a combination of human factors. Technologically it is possible for atomic transactions to be completed far earlier, but commerce is a web of interactions between mostly real humans.
- beezle 6y ago
  Even if trades settled at T+0 (overnight) there are still rules against good faith and free riding violations in addition to liquidation issues.
mschuster91 6y ago
> it takes days to settle those transactions The question is: why? There's absolutely no technical (e.g. nightly batch processing) or process (e.g. physical cross-country mailiing of paper stocks) reason any more. It's 2021 not 1960, technology should have evolved over the last decades. To wait days for money and stock transfers is ridiculous
- gruez 6y ago
  >The question is: why? legacy systems. Someone in another thread mentioned a lot systems still use the "move file to this ftp folder and we'll process it in the morning" method to process transactions.
  - db579 6y ago
    If that's genuinely the case then it's no wonder people are angry. At the scale of money involved legacy tech just shouldn't be an acceptable excuse.
  - MrMan 6y ago
    I think it is legacy thinking more than systems. If we wanted to we could have a system more like European one, but for whatever reasons we don't care enough. The behavioral side of this is far more interesting than the superficial technical issues.
  - NovemberWhiskey 6y ago
    Moving from T+3 to T+2 is estimated to have cost the industry over half a billion dollars in technology and process re-engineering.
    - wnoise 6y ago
      Honestly, that's minuscule compared to the flows involved.
- pomian 6y ago
  I have always been impressed at the speed of financial transactions in Europe. Since SMS became a thing, I have watched in amazement, how people have been buying cars, houses, other goods, transferring money, with their cell phones. It all happens 'instantly.' Meanwhile, when we send money from bank to bank, or to Europe, or UK, it takes 3 days, or more! Surely, it is set up by the system to collect interest during that time period? Multiply by thousands, millions transactions, that is a lot of interest collected.
  - mschuster91 6y ago
    Well... here in Europe the EU parliament passed laws that created the unified payment area (SEPA) as a first step and then forced the banks to offer overnight transfers. The current aim is instant payments, especially to reduce the dominance of Paypal.
  - mgkimsal 6y ago
    you'd collect interest on money you loaned out. they'd have to be loaning out some amount of money, and even if it's just 'backed up' by all this 'inflight' money, that's not terribly safe. I think the majority of the slowness is just down to old/legacy systems, and the sheer volume of stuff that has to be touched to make upgrades. I'm not saying upgrades/changes never happen, but it's a big effort. Why do we still have relatively poor security around a lot of financial stuff? Because the cost of just writing off fraud is still usually much cheaper than the long-term effort of systemic upgrades. Other countries didn't have as much infrastructure to upgrade, and have been able to leap frog the US in many ways.
- yibg 6y ago
  Maybe there are reasons other than technical ones.
walkedaway 6y ago
T+2 is an artifact from the days where there was paper trading and everything was done via open outcry. There's no technical reason it can't be done much faster. ATM transactions are atomic within 60 seconds. Credit cards are faster than that writing to their ledgers. And yes, while behind the scenes those transactions don't settle until next day via bank or credit card processor, there's no technical reason that they can't be done in near real-time. In the US the reason we still have T+2 is that it benefits the financial institutions to do so at the expense of the individual. One of the many reasons I have zero empathy for the industry.
- Jommi 6y ago
  Howabout KYC,Security,fixing errors? You're really saying that there are no downsides in doing this faster?
  - walkedaway 6y ago
    1. KYC done ahead of time. 2. Security? How is doing it faster less secure? If anything it would be more secure because of the reduced threat area, right? 3. Errors should not happen in an electronic system. That's a bug, not an error with the parties involved. If we can do T+3 in an era with zero computing power, it's obvious we can do much faster in the year 2021. Again, we do this in other areas where consumers demand it. Yes, I'm really saying there are no downsides. Can you name one?

db579 6y ago

It may well be that it does take payment processors t+2 days but I think the point remains that it should not.

MrMan 6y ago
The reasons are a combination of human factors. Technologically it is possible for atomic transactions to be completed far earlier, but commerce is a web of interactions between mostly real humans.
beezle 6y ago
Even if trades settled at T+0 (overnight) there are still rules against good faith and free riding violations in addition to liquidation issues.

mschuster91 6y ago

> it takes days to settle those transactions The question is: why? There's absolutely no technical (e.g. nightly batch processing) or process (e.g. physical cross-country mailiing of paper stocks) reason any more. It's 2021 not 1960, technology should have evolved over the last decades. To wait days for money and stock transfers is ridiculous

gruez 6y ago
>The question is: why? legacy systems. Someone in another thread mentioned a lot systems still use the "move file to this ftp folder and we'll process it in the morning" method to process transactions.
- db579 6y ago
  If that's genuinely the case then it's no wonder people are angry. At the scale of money involved legacy tech just shouldn't be an acceptable excuse.
- MrMan 6y ago
  I think it is legacy thinking more than systems. If we wanted to we could have a system more like European one, but for whatever reasons we don't care enough. The behavioral side of this is far more interesting than the superficial technical issues.
- NovemberWhiskey 6y ago
  Moving from T+3 to T+2 is estimated to have cost the industry over half a billion dollars in technology and process re-engineering.
  - wnoise 6y ago
    Honestly, that's minuscule compared to the flows involved.
pomian 6y ago
I have always been impressed at the speed of financial transactions in Europe. Since SMS became a thing, I have watched in amazement, how people have been buying cars, houses, other goods, transferring money, with their cell phones. It all happens 'instantly.' Meanwhile, when we send money from bank to bank, or to Europe, or UK, it takes 3 days, or more! Surely, it is set up by the system to collect interest during that time period? Multiply by thousands, millions transactions, that is a lot of interest collected.
- mschuster91 6y ago
  Well... here in Europe the EU parliament passed laws that created the unified payment area (SEPA) as a first step and then forced the banks to offer overnight transfers. The current aim is instant payments, especially to reduce the dominance of Paypal.
- mgkimsal 6y ago
  you'd collect interest on money you loaned out. they'd have to be loaning out some amount of money, and even if it's just 'backed up' by all this 'inflight' money, that's not terribly safe. I think the majority of the slowness is just down to old/legacy systems, and the sheer volume of stuff that has to be touched to make upgrades. I'm not saying upgrades/changes never happen, but it's a big effort. Why do we still have relatively poor security around a lot of financial stuff? Because the cost of just writing off fraud is still usually much cheaper than the long-term effort of systemic upgrades. Other countries didn't have as much infrastructure to upgrade, and have been able to leap frog the US in many ways.
yibg 6y ago
Maybe there are reasons other than technical ones.

walkedaway 6y ago

T+2 is an artifact from the days where there was paper trading and everything was done via open outcry. There's no technical reason it can't be done much faster. ATM transactions are atomic within 60 seconds. Credit cards are faster than that writing to their ledgers. And yes, while behind the scenes those transactions don't settle until next day via bank or credit card processor, there's no technical reason that they can't be done in near real-time. In the US the reason we still have T+2 is that it benefits the financial institutions to do so at the expense of the individual. One of the many reasons I have zero empathy for the industry.

Jommi 6y ago
Howabout KYC,Security,fixing errors? You're really saying that there are no downsides in doing this faster?
- walkedaway 6y ago
  1. KYC done ahead of time. 2. Security? How is doing it faster less secure? If anything it would be more secure because of the reduced threat area, right? 3. Errors should not happen in an electronic system. That's a bug, not an error with the parties involved. If we can do T+3 in an era with zero computing power, it's obvious we can do much faster in the year 2021. Again, we do this in other areas where consumers demand it. Yes, I'm really saying there are no downsides. Can you name one?