MSRB seeks to shorten settlement cycle for municipals to two days

By Angela McDaniels

Tacoma, Wash., March 1 – The Municipal Securities Rulemaking Board is seeking approval from the Securities and Exchange Commission to shorten the settlement cycle for transactions in municipal securities as a way of reducing risk and improving overall efficiency.

MSRB said its proposal is in response to a securities industry-led initiative to shift the current settlement cycle for all fixed-income and equity securities to trade date plus two days from trade date plus three days. This change requires action by multiple regulators.

MSRB’s proposed rule change would amend its Rule G-12(b)(ii)(B)-(D) to define regular-way settlement as occurring on a T+2 basis.

Exchange Act Rule 15c6-1 defines regular-way settlement as occurring on T+3 for equities and corporate bonds. Although this rule does not apply to municipal securities, the MSRB believes that the regular-way settlement cycle of municipal securities transactions should be consistent with that for transactions in the equity and corporate bond markets.

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