Understanding T+2

Starting 29/Apr/2019, Bursa Malaysia introduce migrated from T+3 settlement to T+2 settlement. Lets understand what is the benefits from T+2 settlement

What is a settlement cycle?

Settlement cycle refers to the number of days transaction gets settled in a stock market in which the securities is traded. It starts with a Trade date (refers to “T” day), in which the “buy” or “sell” transaction occurs and the settlement date in which the exchange of cash and securities take place. The settlement date will depend on the settlement cycle adopted by the market

What is the current settlement cycle in Bursa Malaysia?

Bursa Malaysia currently settles on a T+3 (“T” refer to Trade date) settlement cycle, which was implemented in December 2000.

How T+2 settlement cycle affects you?

A shorter settlement cycle from T+3 to T+2 means quicker access to your money by one day earlier after selling shares and also earlier by one day delivery of shares after purchasing.

What is the payment time by investors to brokers?

Investors are required to make payment not later than 2pm on T+2.

What are the benefits of T+2 settlement cycle?

The benefits of the proposed T+2 settlement cycle to the market place are aplenty, which include the following:

i. Improved Operational Efficiency

A shorter settlement period will avail securities and funds earlier for investors.

ii. Reduced Counterparty Risk

A shorter settlement cycle will mitigate settlement risks market-wide as the exposure to unsettled trades is shortened from 3 days to 2 days.

iii. Strengthened Market’s Competitiveness

The move towards a T+2 settlement cycle harmonizes our post-trade infrastructure with that of major global exchanges in the US, Europe and Asia-Pacific which already operate a T+2 settlement cycle. This will strengthen the attractiveness and competitiveness of the Malaysian market as a listing and investment destination in the region.

*source – bursamalaysia.com

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