The need for faster stock trade settlement has been highlighted by the GameStop mania.

• By the end of the next business day, trades of stocks and other securities must be settled starting Tuesday.
• For most retail traders, the change is expected to be seamless.
• The GameStop mania in 2021 brought more attention to the settlement process.

This week, the years of effort on Wall Street to increase trading speed will be put to the test. If everything proceeds smoothly, the majority of individuals will not perceive any changes.

Starting Tuesday, trades of stocks and other securities must be settled by the end of the next business day. Settlement involves the exchange of money for a security. This "T+1 settlement" is an acceleration of the previous process, which allowed for two business days.

The latest evolution in Wall Street plumbing is to resemble the front-end, as trading apps and 24/7 markets become more prevalent.

Gary Gensler, Securities and Exchange Commission Chair, stated on May 21 that shortening the settlement cycle for everyday investors who sell their stock on a Monday will enable them to receive their money on Tuesday. This will also benefit the markets as time is money and time is risk. By making our market plumbing more resilient, timely, and orderly, the settlement cycle will be shortened.

Most brokerage firms handle settlement automatically for their customers, as physical paper versions of equity shares are all but extinct for most retail traders.

Large dollar trades and funds, particularly those involving international stocks, may face challenges with settlement times due to differences in market alignment.

According to Tim Huver, managing director at investment bank Brown Brothers Harriman, when discussing larger trades, block liquidity can affect the cost of the product, depending on the underlying market.

The SEC has shortened settlement time on trades before, with the shift from T+3 to T+2 occurring in 2017. The official adoption of T+1 happened in February, although many experts had predicted the change.

The GameStop mania in 2021 led to a closer examination of the settlement process, as the agreed-upon price for trades often differed significantly from the market price when the trade was settled. Additionally, there were more instances of "failure to deliver" during that time.

In 2024, there was a renewed buzz about GameStop and other meme stocks. On Tuesday, GameStop's shares soared after the company announced it had raised over $900 million through a new stock sale.