3 ms·
DTCC is not a villian. You would have the same problems for any settlement greater than T+0 and in the limit T>0 the problem actually increases as you eliminate
by beezle 6y ago
DTCC is not a villian. You would have the same problems for any settlement greater than T+0 and in the limit T>0 the problem actually increases as you eliminate the possibility of netting positions.
- modeless 6y agoHow does the problem increase if settlement is measured in milliseconds instead of days? Retail brokerages could just wait for trades to settle instead of trying to maintain this fiction that trades are done before they settle.
- kazinator 6y agoThe absolute speed/latency of trading is not relevant; what is relevant is the speed of trading decision relative to the speed at which information propagates to all involved.
- modeless 6y agoWe're not talking about trade execution here. Trade execution is already fast. We're talking about settlement.
- hntrader 6y agoWhat problem does moving from T+2 to T+0 solve exactly? Aren't the capital requirements the same, and hence the outcome would've been the same? I'm no expert on this topic so I could be wrong.
- freeone3000 6y agoThe entire point of collateral is to hedge against you not being able to provide the money in two days, when the share actually is exchanged for cash. If, instead of collateral, you got the cash, capital requirements would be reduced as you would get the money from sales immediately, and wouldn't need to keep a pile of money to collateralize buys while waiting on the income from your sales.
- treis 6y agoIt (effectively) eliminates counterparty risk if you can move money & stocks fast enough. That (theoretically) drives capital requirements down to 0 to settle trades.
- blueblisters 6y agoTheir legacy system is kinda the villain though. It's optimized for large institutional clients who don't have immediate liquidity to settle trades.