Faster Settlement May Make For Poorer Markets

The global trend toward faster securities settlement, exemplified by the US moving to T+1 and the potential for instant atomic settlement via blockchain, introduces a significant paradox. While atomic settlement removes counterparty credit risk, it drastically reduces capital efficiency by eliminating the netting opportunities inherent in delayed settlement systems (T+2 or T+1). In a T+2 system, a small capital pool can support massive trading volume through offsetting trades; however, in T+0 atomic settlement, each trade must be fully funded immediately, locking up capital and increasing trading costs.

This increased capital requirement favors large institutions capable of deploying massive buffers, potentially leading to wider spreads for retail investors and forcing smaller funds to reduce trading frequency. Furthermore, instead of eliminating intermediaries, atomic settlement redefines their role, shifting it toward coordinating liquidity and managing capital at scale, effectively creating new gatekeepers. The author concludes that speed alone is insufficient; market participants must pair rapid settlement with disciplined operational systems to manage liquidity and capital flows effectively to thrive in the evolving financial landscape.

(Source：Cointelegraph)