The settlement cycle is the gap between trade date and the date cash and securities actually change hands. Every day of that gap is a day of exposure, and the case for shortening it is arithmetic you should be able to produce on demand.
Why shorter means less margin. A clearing house's initial margin must cover the potential adverse move over the period it would take to close out a defaulter. Under the random-walk assumption, volatility scales with the square root of time: an h-day move is z · σ_daily · √h. Halve the horizon and margin falls by 1 − 1/√2 = 29.29%, a figure that depends on nothing but the square-root-of-time rule, not on volatility and not on position size, which is why it recurs in every settlement-cycle impact study. Worked Example 6 turns it into money: on a $500 million position, $5,299,034 of collateral released. Across a whole membership, that capital release is the headline benefit regulators cite.
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When did T+1 start in the US and India?
The regimes. The SEC amended Rule 15c6-1 from T+2 to T+1, compliance date 28 May 2024; the same rulemaking added Rule 15c6-2, requiring broker-dealers to complete allocations, confirmations and affirmations "as soon as technologically practicable and no later than the end of the day on trade date," and amended Rule 204-2 to require investment advisers to keep the corresponding records with date and time stamps (SEC, Shortening the Securities Transaction Settlement Cycle). India moved first: SEBI phased T+1 in from 25 February 2022 and it was fully live across listed scrips by 27 January 2023, making India the first large market to complete the move; SEBI then introduced an optional T+0 (same-day) cycle in beta from 28 March 2024, initially in a limited set of scrips through a limited set of brokers, with scope subsequently enhanced (SEBI circulars, March 2024 and December 2024).
What does T+1 cost cross-border investors?
Now the cost side, which the press releases underplay. Shortening the securities cycle does not shorten the currency cycle it depends on. FX spot conventionally settles T+2, and CLS has a hard submission deadline of 00:00 Central European Time on value date, with CET six hours ahead of US Eastern winter time, 18:00 ET on the previous calendar day. For a European fund buying US equities near the close, that turns a 26-hour FX window under T+2 into a 2-hour window under T+1 (Worked Example 6 does the clock arithmetic), a 92.3% compression for a trade that has not otherwise changed. The three responses are all costly: execute FX earlier and lose the ability to match the exact executed quantity; settle the FX bilaterally, outside PvP, reintroducing precisely the Herstatt exposure the settlement risk section was about; or pre-fund, at about 0.96 basis points of AUM per year for a fund turning over 80% of its book annually at a 4.30% funding rate.
The honest summary: T+1 reduces clearing-house credit exposure by about 29% and moves operational and funding risk onto cross-border investors and their FX providers. Both are real, and an analyst who can state both with the arithmetic is worth more than one who has memorised the compliance date.