Understanding Settlement Cycles: What Does T+1 Mean for You?
Did you know there's a difference between the date you trade a security and the date the transaction settles? Trade date is the day your order to buy or sell a security is executed; settlement date is the day your order is finalized and on which funds and the securities must be delivered. Currently, settlement date occurs two business days after trade date, but recent rule amendments from the Securities and Exchange Commission (SEC) and conforming FINRA rule changes will soon make that cycle one day shorter.
Beginning on May 28, 2024, the new standard for settlement will become the next business day after a trade, or T+1.
This isn't the first time such a change has occurred. In 2017, the SEC shortened the settlement cycle from T+3 to T+2. The move to T+1 reflects improvements in technology that allow trades to settle more quickly. With most trading and banking activity occurring online, extra days to physically deliver securities or funds are no longer needed.
Source Fool.com
