Why T+0 is the future of securities trading and how Prime Trust’s infrastructure makes it a reality
Trade + zero days means 'instant settlement.' Imagine that -- you make a trade and that transaction is executed with no delay. While this is the norm in digital asset and private securities trading, for public securities trading, it is a long overdue future.
Today, public securities trade + 2 days, or ‘T+2’. That means that there is a two day lag in settlement for every trade that is executed across the public markets financial system. T+2 allows clearinghouses time to process transactions and settle remittances across various custodians and their client accounts.
The impact of T+2
Recently, T+2 was brought to greater public attention when trading of popular securities GME and AMC were restricted on various trading platforms, including Robinhood, TD Ameritrade, and Charles Schwab. The trading volume of these assets had over-extended the capacity and capital reserves of these clearing houses. As a result, trading was restricted to allow existing trades to be settled through the system and to reduce the risk of the securities experiencing significant price swings as the settlement took place over the two-day period.
This cumbersome two-day process of settlement is antiquated and highlights an area of inefficiency in the market, where ledgers are not able to keep up with market activity. The outcome of inefficient infrastructure is a frustrating experience for end users, the traders.
Since its introduction in 2008, blockchain, or distributed ledger technology (DLT), has been showcased as an example of what a trusted, peer-to-peer ledger can achieve by removing the intermediary. While blockchain technology still has scalability issues to address before it could conceivably support high volume transactions, it has sparked demand for instantaneous settlement networks.
Instantaneous settlement with T+0 financial infrastructure
At Prime Trust, our all-in-one financial infrastructure replaces legacy “plumbing” with a modernized API ecosystem, made up of settlement, custody, compliance, indemnity, rails, and liquidity APIs.
Specifically, our Settlement API provides instant T+0 settlement of fiat currency, bitcoin, ethereum, and Ethereum-based ERC20 tokens, and private securities (stocks and bonds) between our network partners. For customers of Prime Trust’s network partners, this means that their funds from each trade, deposits, and withdrawals are available immediately.
In January, tZERO announced a partnership with Prime Trust to support the custody and trading of digital asset securities on the tZERO ATS, tZERO’s broker-dealer subsidiary.
A leader in blockchain innovation and liquidity for digital assets, tZERO provides an alternative trading system for digital securities, including cryptocurrencies. The platform is committed to replacing legacy systems with the future of financial technology.
As a partner, Prime Trust supports tZERO’s trading system with network infrastructure for instantaneous trade settlement. Our API system makes deployment of our settlement network simple, allowing tZERO to focus on building their marketplace of companies and broker dealers.
The future of trading
Instant settlement is transforming how many financial services businesses operate today, and will be a critical component of a robust and reliable public marketplace. T+0 provides greater transparency around participants’ funds and reduces risk by deleveraging the system.
Our world is increasingly experienced in real time, with wait periods shrinking across all areas of life -- it’s time financial services caught up. Learn more about our all-in-one financial infrastructure and how your financial services business can benefit from T+0 with our Prime Core APIs.