Faster settlement may make for poorer markets

Opinion by: Chris Kim, CEO and co-founder at Axis.

Shorter settlement cycles are now sweeping the globe. In 2024, the United States moved equities to T+1 settlement. Europe, the United Kingdom, and several Asian markets are expected to follow this lead by 2027. Trades are moving ever closer to real-time. 

The markets that fail to keep up risk falling behind.

Blockchain-based finance pushes that concept even further. Stablecoins and tokenized assets enable transactions to settle instantly through atomic settlement, where payment and asset transfer occur simultaneously, allowing counterparty credit risk to disappear.

The promise of faster, safer settlement has driven stablecoin transfer volume over $1.8 trillion.

Yet, the speed that removes one risk introduces another. Capital must be ready for every transaction, liquidity must flow without pause, and the balance of influence begins to favor those able to coordinate these efficiently. 

As tokenized assets expand and financial infrastructure increasingly moves onchain, atomic settlement is often presented as the inevitable endpoint of market modernization.

The story isn’t that simple. The forces unleashed by atomic settlement reach beyond operational mechanics to reshape who can participate and on what terms.

The atomic settlement paradox

The core challenge is straightforward. Faster settlement demands more capital.

Traditional financial markets rely on delayed settlement and centralized clearing systems because of the needs of investors worldwide across different time zones. 

In a Trade+2 (T+2) or Trade+1 (T+1) system, trades occur continuously during the day, while the final transfer of securities and cash takes place later through clearinghouses that aggregate and reconcile positions, giving market participants time to make arrangements around FX, for example.
This delay also enables prime brokers and clearinghouses to net exposures before settlement occurs. Not all trades are physically settled. A market maker may buy and sell securities dozens of times during a trading session, yet only the final net position requires settlement.

The result is powerful capital efficiency. A small pool of money can support a massive volume of trading because money circulates repeatedly before final settlement. Atomic settlement removes that flexibility and fundamentally changes the dynamic. In a T+0 environment, each trade must be funded and settled immediately, shrinking netting opportunities and locking capital into each transaction.

The system becomes operationally faster, but financially less efficient. This is the phenomenon called the atomic settlement paradox.

Capital efficiency under pressure

The consequences for market participants are substantial. In a netted T+2 environment, $1 million in capital can support over 100 times that in trading volume because offsetting trades reduce the final settlement obligation. 

Related: What NYSE’s exploration of onchain systems means for financial markets

In an atomic environment, however, that same $1 million can only support $1 million in trading at any given moment. Capital that previously circulated through dozens or hundreds of trades now becomes gridlocked until settlement completes. 

Higher capital requirements translate directly into higher trading costs. This means strategies built around rapid turnover suddenly require far more capital to operate. A mid-size hedge fund that might normally open and close positions repeatedly throughout the day may now need fully pre-funded capital for each transaction, forcing funds either to hold significantly larger cash buffers or reduce trading frequency.

As liquidity providers commit more capital to each trade, those costs filter through the market and affect trading behavior over time. Retail investors may ultimately experience this as slightly wider spreads or less depth at the best price.

This learning curve isn’t isolated. Even the shift from T+2 to T+1 created measurable operational changes. NSCC data showed the Clearing Fund fell roughly $3.0 billion (23%) from the T+2 average, freeing some capital but now requiring firms to manage liquidity and collateral within a single day rather than over two. These constraints will intensify under T+0 atomic settlement.

Liquidity’s new gatekeepers

Proponents argue that atomic settlement will simply make markets faster, safer, and more efficient, but by assuming that removing delays eliminates risk and reduces friction. Ironically, removing settlement delays reintroduces the very intermediaries that blockchain technology was meant to dethrone. Even as settlement becomes instantaneous, liquidity must be coordinated, risk managed, and capital deployed efficiently. Institutions that can do this at scale effectively control access to market activity, creating a new kind of intermediation under the guise of speed.

Banks and large financial intermediaries, therefore, remain central to the functioning of markets even as settlement infrastructure evolves. Much of their central role involves providing capital buffers that allow transactions to settle in real time. In this era, the intermediary layer evolves, and in some ways grows, taking on responsibilities that blockchain was expected to remove. 

While concerns that atomic settlement may favor only the largest players are founded, these pressures are also spurring innovation. Liquidity pooling, real-time netting, and cross-venue margin optimization could restore some of the efficiency lost under atomic settlement. These solutions will become critical market infrastructure, and the firms that can deliver both speed and efficiency will find their place in the next generation of financial markets.

With great speed comes great responsibility

Faster settlement today looks less like a back-office upgrade and more like a phenomenon capable of rewriting the rules of the market. Atomic settlement doesn’t necessarily eliminate frictions, but redistributes them toward those best equipped to manage them, giving scale and coordination a structural advantage in supporting continuous market activity. Rather than eliminating intermediaries, atomic settlement shifts its function toward orchestrating capital and liquidity across the market. As tokenized assets continue to expand, the scale and complexity of trades make efficient management even more critical.

This shift shakes a core assumption of crypto finance: speed alone doesn’t remove the need for trusted infrastructure. Capital and liquidity must still be coordinated and optimized, and the participants who build systems to manage these flows will define which trades are possible and which strategies will scale. What’s considered a technology upgrade is, in fact, a test of market design, operational discipline, and strategic foresight.

Markets have always rewarded efficiency. In this environment, it’s increasingly evident that the firms and platforms that can align speed with disciplined operations will capture their benefits, while those who can’t will be limited by the very pace they sought to achieve.

Speed creates opportunity, but only when paired with systems that turn it into a sustainable advantage.
Opinion by: Chris Kim, CEO and co-founder at Axis.