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if you are asking "why does t+2 settlement exist? that's dumb all settlement should be immediate or t+1" well... yeah i get it but the problem has to do with the way we tax gains and losses and stock options, allow me to explain in a few tweets
the principal reason we can not shift to a shorter settlement window is that gains ae taxable at the point of realization. imagine you have a very low cost-basis shares and sell CALL options to earn extra income. if the option is exercised by the buyer you have to deliver shares
it would be really terrible for you if someone decided to exercise their call and you had to sell them your low cost-basis shares and lock in a huge profit and pay lots of taxes. the way to work around that is to have a built-in window for you to act
so the process to deal with that is you get a window so that you are notified of the assignation and then have a chance to buy some new shares at t+1 and deliver those new shares to the option exercise so you don't have the adverse tax effects.
at the end of the day... yes its weird and anachronistic but all these things have a reason behind them. could we improve them? mostly yes. if you can fix the tax code so that timing and realized / unrealized distinction don't matter then yeah absolutely we can have t+1 or t+0
