The time it takes to receive proceeds after selling stocks in Korea's securities market will be shortened by one day. The Korea Exchange and other securities-related institutions have drafted a roadmap to shorten the settlement cycle, overhauling a settlement system that has been maintained for more than 50 years since its introduction in 1972, and have begun gathering market opinions. The overhaul focuses on improving investors' capital efficiency and reducing settlement risk in the securities market.

■ From T+2 to T+1… Proceeds from stock sales to arrive one day earlier

The core of the draft roadmap prepared by securities-related institutions on the 2nd is changing the current T+2 settlement method to T+1. Korea's stock market currently operates on a structure in which settlement is completed on the second business day after the trading day. If an investor sells stocks on Monday, they receive the proceeds on Wednesday. With the settlement cycle shortened by one day, selling the same stocks on Monday would allow the investor to receive the proceeds on Tuesday. The aim of the overhaul is to improve the efficiency of capital management by accelerating the return of sale proceeds to investors.

■ The U.S., EU, and UK have already moved

Korea introduced the T+2 settlement system in 1972. Since then, the domestic securities market has maintained a settlement failure rate near 0% and operated a stable clearing and settlement system. However, as major overseas securities markets have moved toward reducing settlement times, the need for institutional change has been raised in the domestic market as well. The United States transitioned to a T+1 settlement system in May 2024, while the European Union (EU) and the United Kingdom have set October 2027 as their target transition date. Hong Kong postponed its originally planned schedule from the second half of 2027 to the second half of 2028. In Korea, discussions have also proceeded toward shortening the settlement period, taking into account these international changes, the competitiveness of the securities market, investor convenience, and the preparedness of the financial investment industry.

■ Improving capital efficiency and reducing settlement risk

The overhaul plan goes beyond simply advancing the date investors receive their sale proceeds. Another key objective is to reduce risks that may arise during the settlement process by shortening the time from trade execution to final settlement. In addition, plans to automate settlement-related operations in the securities industry and standardize processing procedures are included in the direction of the reform. The idea is to reduce operational risks and workload arising from business processes.

■ Still a draft… 'At the stage of gathering market opinions'

However, the roadmap announced this time is a draft, not a finalized plan. Securities-related institutions have entered the process of collecting opinions from market participants. If the settlement cycle, which Korea's securities market has maintained for more than 50 years, is actually shortened, changes will occur in when investors receive their sale proceeds and in the settlement processing schedules of the securities industry.

[This article was written based on the contents included in the draft roadmap for shortening the securities market settlement cycle. Whether the system will be implemented and detailed schedules should be confirmed through official announcements to be finalized. This article was written with some assistance from AI.]