Regulatory Notice 23-15

In view of the Securities and Exchange Commission’s (SEC) changes to Rule 15c6-1(a) under the Securities Exchange Act of 1934 which involves the shortening of the standard settlement cycle for most broker-dealer transactions from T+2 (two business days after the trade date) to T+1 (one business day after the trade date) effective May 28, 2024, the Financial Industry Regulatory Authority, FINRA, has published a new Regulatory Notice 23-15.
In this notice, FINRA explains that along with the reduction in settlement time, the payment period for customer transactions under Regulation T of the Federal Reserve Board is also shortened from T+4 to T+3. Regulation T requires broker-dealers to promptly cancel or liquidate customer purchase transactions in margin or cash accounts if payment is not received within one payment period from the purchase date. Alternatively, they can apply for an extension of this time period.
To facilitate this shift and to accommodate the filing for an extension under the new T+1 settlement cycle and thus the T+3 payment requirement – FINRA is now updating its Regulatory Extension (REX) system. Specifically, starting from May 31, 2024, firms can submit extension of time requests using both the batch file process and an online request form accessible through the REX system via FINRA Gateway, the Authority’s compliance portal.
It’s crucial to note that if firms have trade dates before the May 28, 2024 compliance date for the new settlement requirements, they must continue to apply for extensions based on the previous T+4 payment period. This means that when filing an extension request on May 28, 29, or 30, 2024, firms will need to use T+4 as the payment period. However, from May 31, 2024, onward, they must file Regulation T extension requests under the new T+1 settlement cycle.
According to FINRA, the REX system has been updated to accommodate these changes. Furthermore, FINRA is currently enhancing the REX Customer Test Environment (CTE) to allow testing under various scenarios for both batch and online request form filings. Testing for T+1 settlement will be available from September 25, 2023 through April 5, 2024.
Firms can transmit test data files via SFTP to their current Regulation T SFTP test server and place these files into the /rex/in subdirectory. Reports containing information on all extension of time requests, as well as their associated data elements, will be accessible through FINRA Gateway. The reports with test results will be posted the next business day to the same test server, in the firm’s /rex/out subdirectory.
For any technical problems or the need to request a FINRA user ID and password for testing, firms can contact the FINRA Help Desk at (800) 321-6273.
To assist firms in determining extension filing dates after the transition to T+1 settlement, FINRA has provided a 2024 Margin Extension Schedule, which includes holidays and market events. Additionally, general guidance on filing extensions is available on FINRA’s Margin Regulation page.