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Securities Processing: The Effects Of A T+3 System On Security Prices, Victoria Lynn Messman

Doctoral Dissertations

This study investigates the settlement period, including payment delays and failed deliveries that occur during the processing of U.S. equity transactions, and its effects on observed stock prices. Payment and delivery occur three to six calendar days after the trade date in the standard three business day settlement cycle, referred to as T+3.

First, the buyer benefits from a payment delay, during which time he can earn interest on the cash needed to settle the trade. Since the seller has no analogous opportunity, I anticipated that the cost of the payment delay would be reflected in equity prices at a …