Multi-asset investment specialist Saxo Bank has issued a notice to its white label (WL) partners regarding the imminent transition of the US and Canadian markets to T+1 settlement.
As of May 27 (Canada) and May 28 (US), these markets move from a T+2 settlement cycle to a T+1 settlement cycle. This means that the value date of these stock purchases is one day later, instead of two.
When buying US shares (T+1) and selling EU shares (T+2) on the same date, the customer’s interest rate will be reduced for one day (or negative interest will accrue), as the cash for the US purchase are already required one day later, while cash for EU sales only becomes available two days later.
When selling US shares (T+1) and buying EU shares (T+2) on the same date, the customer’s interest rate will increase for one day (positive accrued interest), as the cash for US sales is available as early as one day later, but cash for EU purchases is required two days later.
Cash-strapped clients may be charged interest for negative NFE and should not buy US stocks on the same day as selling EU stocks if they want to avoid interest charges.
For partners who need to settle their net stock purchases daily with Saxo, the firm will make available a ‘Settlement Scale’ on the FFP. There, WL partners can view projected settlement amounts to ensure they can proactively transfer sufficient funds in a timely manner.