Wall Street's 23-hour trading plan exposes settlement bottleneck

Wall Street is gearing up for a 23-hour-a-day, five-day-a-week trading schedule. But the settlement infrastructure remains designed for a market with a defined close.

This legacy system is not really aligned with the longer trading day.

Most of the focus this year has been on trading hours, but that debate misses the more critical issue.

Lengthening the session does not affect post-trade processing. A stock purchased at 2 AM under Nasdaq's Global Trading Hours will still settle through the same batch cycle that was designed for a market closing at 4 PM.

On-chain markets work differently. There, transactions settle continuously, with delivery and payment occurring in seconds instead of waiting for the next day's settlement window.

Three Decades to Shave Four Days

Since the mid-1990s, US equity settlement has been shortened exactly three times. T+5 shifted to T+3 in 1995, then T+3 to T+2 in 2017, and finally T+2 to T+1 in May 2024. The last change required about three years of planning and coordination by SIFMA, the ICI, and DTCC.

Each reduction cut one day from the settlement cycle. In total, it took three decades to go from five days down to one.

With the trading day set to become significantly longer, there will be more chances to transact across different time zones.

However, the settlement infrastructure will keep running on a different timetable. The outcome is a system that is quicker than before but still not continuous.

What This Batch Cycle Costs

Speedy settlements are not just for show.

In the interval between trade execution and settlement, counterparties face the risk that a transaction might fail. That is why DTCC maintained an average of $13.4 billion in margin daily under T+2 – collateral solely to cover counterparty default risk during that gap.

The switch to T+1 alone is thought to have cut that margin requirement by about 41%.

That represents capital tied up for an additional full day, multiplied across the entire market, purely because settlement used a batch cycle rather than a continuous one.

The cost becomes more pronounced when markets close on Fridays.

A trade made on Friday afternoon stays unsettled throughout the weekend, not clearing until Monday morning at the earliest. The collateral backing it is also locked.

On-chain markets do not need to treat weekends as exceptions; the transaction settles at the moment it happens.

DTCC is Chasing the Same Thing

DTCC recognizes the limitations of T+1 settlement. In July, it conducted its biggest tokenization pilot, with more than 30 institutions taking part, among them JPMorgan, BlackRock, and Vanguard.

The pilot involved transferring tokenized equities, ETFs, and treasuries in live production trades.

For example, JPMorgan turned its Invesco QQQ Trust holdings into tokenized collateral and used that to meet CME margin requirements in real time.

DTCC intends a wider launch in October and a link to the Stellar network in the first half of 2027, as part of what it describes as a multi-chain strategy for tokenized settlement.

This institution oversees over $114 trillion in securities and is opting to move toward continuous settlement – a clear signal of the trend.

"Clear rules matter because they give market participants certainty about how they can operate," says Shunyet Jan, Binance's Head of Exchange and Trading. "We've seen across different markets that once the framework is clear, institutions have more confidence to participate and build. As tokenized markets develop alongside traditional markets, having that regulatory clarity becomes increasingly important."

Price Discovery Link Over the Weekend

Although the NYSE shuts down on Fridays, tokenized equity markets stay open through the weekend. Price discovery still functions effectively during this time.

Weekend pricing of bStocks has captured a median 92% of the eventual Monday opening gap, with a residual deviation of only 0.19%. This is achievable only because those trades settle in real time, rather than just quoting a price against a market that will not confirm until Monday.

A quote lacking settlement is merely a forecast. A trade that settles instantly, with both asset and payment moving, becomes a cleared position that a market maker can immediately hedge, lend against, or unwind.

On Binance's tokenized equity market, settlement occurs immediately. This sets the benchmark that the T+1 era will ultimately be compared to.

The T+1 Benchmark May Not Be the End

T+1 settlement was created to address a problem stemming from faster markets: trade settlement was too slow compared to trading speed.

As conventional markets shift toward 23×5 trading, a settlement system that still operates on business days will become an increasingly obvious bottleneck.

None of this renders T+1 obsolete overnight, nor makes DTCC's pilots a mere formality. For traditional markets, T+1 remains a significant improvement over T+2 and T+3. Moreover, legal recognition of tokenized settlement finality, cross-network interoperability, and regulatory approval still need to catch up with the technology's capabilities.

Yet it may ultimately turn out to be just an intermediate step.

The key benchmark for a market that never stops may not be trade execution speed.

Rather, it may be how fast ownership and payment become final.

Trading has already broken free from the clock. Settlement might be next.