This too smells fishy and rigged to me. Modern databases don't need T+2 to achieve consistency. Ask PayPal or Visa or Alibaba. They can do it in a matter of seconds. But the people up at the top of the stock market choose to not implement it. Why?
> on margin
What about high frequency trading instiutions on Wall Street? Who gives them their margins, and why is it that they are subject to much less interference than RobinHood users?
But that's actually not true though, it takes days to settle those transactions, the payment processors just provide the illusion of instaneousness by smoothing it over with their own fungible cash reserves.
The question is: why? There's absolutely no technical (e.g. nightly batch processing) or process (e.g. physical cross-country mailiing of paper stocks) reason any more. It's 2021 not 1960, technology should have evolved over the last decades. To wait days for money and stock transfers is ridiculous
legacy systems. Someone in another thread mentioned a lot systems still use the "move file to this ftp folder and we'll process it in the morning" method to process transactions.
Other countries didn't have as much infrastructure to upgrade, and have been able to leap frog the US in many ways.
In the US the reason we still have T+2 is that it benefits the financial institutions to do so at the expense of the individual. One of the many reasons I have zero empathy for the industry.
Again, we do this in other areas where consumers demand it.
Yes, I'm really saying there are no downsides. Can you name one?
The problem is, you have lots and lots of databases-- there's not one central ledger of every position. Settlement is effectively an atomic commitment protocol, so that if you are selling a stock you expect to receive from one firm to another, and someone else fails to deliver, you need to be able to unwind the downstream trades-- but also need all transactions to eventually become final.
The T+1, T+2, T+3 periods are convenient in human units, because sometimes it's desirable to have a human in the loop when unexpected things happen.
People love knocking Bitcoin here, but this is why the technology exists. No reason to continue letting these institutions run smoke-and-mirrors with everyone's money
But there's a market that exists at substantial scale that was originally built around T+14 settlement (and then T+7, T+5, T+3, all the way down to T+2 which is really still brand new). And while there's substantial risks and costs that come from delayed settlement, there's also substantial benefits... and an entire global financial system that relies upon the properties we get from these settlement delays. Another equilibrium being perhaps slightly better overall doesn't necessarily justify reinventing the wheel.
I suspect we'll get to T+1 settlement for stocks and many banking transactions in a few more years (we're already there for options)... and then it may be time to discuss the benefits of various types of "instant" settlement for some subset of financial activity.
You might also not want to have a public ledger of all the ownership interests.
It also doesn't exactly solve the problem. You still have the prospect of double spend, etc, until commitment/ledger settlement. And for high stakes transaction you probably want humans in the loop talking about what to do when these things happen instead of some automated policy.
It’s shortened over time, but things across many parties still need to be sorted out, including buffets for fraud. Visa also doesn’t work the way you think it does, much like checks, ACH transfers, and wires also take days to clear.
There's a Wikipedia page on it (last edit December 2019): https://en.wikipedia.org/wiki/T%2B2
See: https://www.investopedia.com/terms/e/erroneous-trade.asp
Because it allows for more internal netting, and more time to reconcile discrepancies with the tape.
If you're familiar with computers, it's the same kind of tradeoffs as doing lots of rpcs vs. batching.