4 ms·
> Does settling/clearing on a delay actually serve a purpose, or just enables someone to collect rent? It removes friction from the market since it gives time
by tonfa 2y ago
> Does settling/clearing on a delay actually serve a purpose, or just enables someone to collect rent?
It removes friction from the market since it gives time to line things up between market participants.
For example if some assets are on loan, it gives time to the people who were borrowing it to find some other market participant to borrow it from.
https://www.bloomberg.com/opinion/articles/2024-02-28/trading-stock-takes-time https://www.bloomberg.com/opinion/articles/2024-02-28/tradin... was a good explainer
- lucianbr 2y agoIt's funny that the article explaining why it is good and necessary to have T+2 settlement also mentions that markets are moving to T+1 settlement. To me that seems like a contradiction. Must be my cluelessness talking.
- tonfa 2y agoIt's going to be a tradeoff in any case (T+2 requires more collateral but gives more times to line things up for settlement)