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"T+2" - What Changes In The Securities Licensing Exams

Effective the business day after Labor Day, September 5th, 2017, regular way settlement for corporate and municipal securities trades moves from 3 business days down to 2 business days. For example, a trade that takes place on Monday, September 18th, 2017 will now settle on Wednesday, September 20th (instead of September 21st). Thus, regular way settlement becomes "T+2" - Trade Date + 2 Days, instead of the previous T+3.

This change does NOT affect regular way settlement for U.S. Government securities trades, which remains T+1, nor does it affect settlement of trades of listed options, which also remain T+1.

This change affects many different aspects of the securities licensing exams. These include:

  • Ex Dates for Cash Dividends: Become 1 business day prior to record date; as compared to the previous 2 business days prior to record date.
  • Computation of Accrued Interest on Bonds: Interest accrues up to, but does not include, settlement date. With settlement being 1 day shorter, the accrued interest computation reflects the shorter time period.
  • Exercise Settlement of Listed Stock Options: If a stock option is exercised (as opposed to traded), the underlying stock is being delivered in a regular way trade. Exercise settlement becomes 2 business days instead of 3 business days.
  • Collection of Funds Under Regulation T: Regulation T requires that funds for a purchase be collected "promptly" but no later than "S+2." Since regular way settlement is now 2 business days rather than 3 business days, the latest time to collect payment for a purchase is 4 business days ("S+2") as compared to the previous 5 business days.
  • Regulation SHO Mandatory Buy In Rules (Principals Exams Only): Regulation SHO Rule 204 requires that if a security is sold short and then is not delivered on settlement, mandatory buy-in occurs the morning of T+4. This now becomes T+3 (the same as the morning after settlement date). Rule 204 also requires that if a security is sold long and then is not delivered on settlement, mandatory buy-in occurs the morning of T+6. This now becomes T+5.

Note that with a major rule change such as this one, FINRA typically "turns off" the affected questions for 90 days after the change and then reintroduces them with the changed information. However, these changed questions could still show up as "trial questions" so that they can be validated by FINRA to ensure that no errors have been introduced from the changes that have been made.