Is it possible to have same day settlement on the stock markets by using more efficient processes and technology?
I know that the T+3 settlement was earlier replaced by the T+2 settlement process. Can we improve it further to settle stocks the same day? And if yes, what are the challenges and problems that need to be addressed?
Some firms are already pushing toward T+0.
At one broker, when users trade with other in house accounts, settlement is T+0.
Another broker offers T+1 settlement on some stocks so that when assigned on a covered call, one can buy new shares at current price, avoiding an assignment on the original shares which have a large capital gainand would therefore incur a larger tax bite.
Nearly 100 years ago, stock settlement was T+1 and rose to as much as T+5 some fifty years ago. T+1 might be feasible again.
