US Corporate Bond Settlement Cycle Change from T+3 to T+2

Summary

The document discusses the settlement convention for US corporate bond trades and the transition from T+3 to T+2 in September 2017. It reports the author’s understanding that T+3 applied before the change and that the shorter T+2 cycle took effect on September 5, 2017. As a data check, the author examines TRACE Enhanced Database settlement dates and finds that roughly 90% of daily transactions matched T+3 before the effective date and that most matched T+2 afterward.

The response points to industry association publications as consistent with the transition, but does not independently verify the rule or provide the underlying publications’ details. The proportions are the author’s reported observation, not a complete audit of every trade; exceptions and special settlement terms may exist. Researchers using historical bond data should account for the change when interpreting settlement dates, while confirming applicable conventions and data definitions for their sample and transaction types.

Key ideas

• The described US corporate bond settlement cycle changed from T+3 to T+2 effective September 5, 2017.
• The author reports TRACE settlement-date patterns that broadly align with the transition.
• Industry association materials are cited as corroborating context, but the document does not reproduce their evidence.
• Historical analyses should account for the settlement-cycle change and check for exceptions in the data.

Tags

# Days to settlement for US corporate bonds


# Days to settlement for US corporate bonds












This question may be not be very relevant to quantitative finance, but I guess fixed-income modellers may encounter this some time as well.

The question is about the days to settlement for US corporate bond transactions. My current understanding is that they used to be settled as T+3 before Sep 4, 2017. In 2017, SEC has a rule requiring brokers to switch from T+3 to T+2, effective starting from Sep 5, 2017. In other words, after Sep 5, 2017, corporate bond transactions are settled as T+2.

In addition, I also checked the data field `stlmnt_dt` in the TRACE Enhanced Database (post-2/6/12) and find that the majority of daily transactions (~90%) are settled T+3 before Sep 5, 2017 and that the majority are settled T+2 starting from Sep 5, 2017.

However, I would still like to ask corporate bond traders to confirm my findings.

## Answer by Sharad (score 2)

https://quant.stackexchange.com/a/75442

Not technically a corporate bond trading source but the following SIFMA (Securities Industry and Financial Market Association; the leading trade association for institutional participants in the U.S. and global capital markets) publications are consistent with your findings.

SIFMA:Shortening the Settlement Cycle

SIFMA:T+2 Settlement Update

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.