What does T+1 Settlement mean?

T+1 settlement means that securities transactions generally settle one business day after the trade date. For example, a trade executed on Monday generally settles on Tuesday, provided Tuesday is a business day and there is no relevant market holiday.

The detail:

Effective 28 May 2024, the standard settlement cycle in U.S. markets was shortened from T+2 (trade date plus two business days) to T+1 (trade date plus one business day). This industry-wide change enhances efficiency and reduces risk in the securities settlement process.

What this means in practice: Under T+1, all applicable securities transactions settle one business day after the trade date. For example, if you sell shares of ABC stock on Monday, the transaction will settle on Tuesday.

Impact on account requirements:

• Fed Call / Reg T (Initial purchase or short): Payment period is reduced by one day, from T+4 to T+3.
• House Call / Maintenance Call: Payment period is reduced by one day, now T+1.
• Cash Accounts: Purchases and sales now settle the next business day. Proceeds from closing a position are available the next business day.
• Shorting Stock (Reg SHO 204): The buy-in requirement timeline has been reduced by one day, from T+3 to T+2.