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cover of episode Beyond Faster (T+1) Trade Settlements: The Hidden Costs of Optimization

Beyond Faster (T+1) Trade Settlements: The Hidden Costs of Optimization

2024/5/29
logo of podcast Money For the Rest of Us

Money For the Rest of Us

AI Chapters Transcript
Chapters
The US is moving to a T+1 settlement for stock trades, meaning trades will settle in one day instead of two. This change is intended to improve market resilience and reduce risk, but it also presents challenges for brokers and other market participants. The transition to T+1 may lead to glitches and increased funding costs.
  • Faster settlement reduces counterparty risk and the risk of failures.
  • The transition to T+1 may lead to glitches and failed trades.
  • Not every country is adopting T+1, creating challenges for international exchanges.
  • Asset managers may be unprepared for the transition.

Shownotes Transcript

Why stock, ETF, and bond trades are optimized to settle in less than a day, allowing investors quicker access to their cash and securities. What are the benefits and costs of optimization in the relentless drive for cheaper, faster, and more profitable.

  • Why countries are moving to T+1 settlement from T+2 for security trades
  • What will it take for secur
  • How BlackRock and Franklin have launched Treasury funds that are tokenized and trade on the Etherium network
  • How optimization works and what are the tradeoffs
  • How we can use satisficing and rules of thumb in order to cope with the complexity of the world

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Show Notes

About the ‘T+1’ Rule Making US Stocks Settle in a Day by Lydia Beyoud and Greg Ritchie—Bloomberg)

SEC Chair Gensler Statement on Upcoming Implementation of T+1 Settlement Cycle—SEC)

What faster trading cycles will mean for US markets by Jennifer Hughes and Harriet Clarfelt—The Financial Times)

Speedier Wall Street Trades Are Putting Global Finance On Edge by Greg Ritchie—Bloomberg)

BlackRock closes in on crown of world’s largest bitcoin fund by Will Schmitt and Brooke Masters—The Financial Times)

Optimal Illusions: The False Promise of Optimization by Coco Krumme)

Financial Statement Analysis with Large Language Models by Alex G. Kim, Maximilian Muhn, and Valeri V. Nikolaev—The University of Chicago)

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