Settlement Date
Settlement Date
The date when securities trades finalize, ownership transfers, and payment is due. Regular-way settlement is T+1 (one business day after trade date) for equities, U.S. Treasury securities, corporate bonds, and municipal bonds, and same-day for options. Cash settlement occurs on trade date (T+0). The U.S. moved from T+2 to T+1 settlement for most securities on May 28, 2024.
If a client sells 100 shares of stock on Monday (trade date), the proceeds will be available in their account on Tuesday (T+1 settlement date). If they need cash by Friday, they must sell by Thursday at the latest.
Trade date (when the order executes) is different from settlement date (when payment/delivery occurs). Many investors expect immediate access to proceeds, but regular-way settlement takes 1 business day for most securities (T+1 as of May 28, 2024). The May 2024 change standardized settlement to T+1 for equities, corporate bonds, municipal bonds, and Treasuries.
How This Is Tested
- Calculating settlement date from a given trade date (counting business days, not calendar days)
- Determining when a client will receive proceeds from a securities sale
- Understanding that most securities now settle T+1 as of May 2024 (equities, Treasuries, corporate bonds, municipal bonds)
- Understanding cash settlement (T+0) versus regular-way settlement (T+1)
- Recognizing that weekends and holidays extend settlement dates
Regulatory Limits
| Description | Limit | Notes |
|---|---|---|
| Regular-way settlement for equities | T+1 (1 business day) | Trade date plus one business day (changed from T+2 on May 28, 2024) |
| Regular-way settlement for U.S. Treasury securities | T+1 (1 business day) | Trade date plus one business day |
| Regular-way settlement for corporate bonds | T+1 (1 business day) | Trade date plus one business day (changed from T+2 on May 28, 2024) |
| Regular-way settlement for municipal bonds | T+1 (1 business day) | Trade date plus one business day (changed from T+2 on May 28, 2024) |
| Cash settlement | T+0 (same day) | Settlement occurs on trade date |
| Options settlement | T+1 (1 business day) | Next business day after trade |
Example Exam Questions
Test your understanding with these practice questions. Select an answer to see the explanation.
Marcus needs $50,000 in cash by Friday, September 15th for a home down payment. He plans to sell stock holdings from his cash account to generate these funds. Assuming all days are business days (no holidays), what is the latest date Marcus can execute the stock sale to ensure the funds are available by September 15th?
B is correct. Stocks settle on a T+1 (regular-way) basis as of May 28, 2024, meaning settlement occurs one business day after the trade date. If Marcus sells on Thursday, September 14th (trade date), settlement occurs on Friday, September 15th (T+1), making the funds available when he needs them.
A (Wednesday, September 13th) would settle on Thursday, September 14th (T+1), which works but is not the LATEST date Marcus could trade. C (Friday, September 15th) would settle on Monday, September 18th (T+1), missing the deadline. D (Tuesday, September 12th) would settle Wednesday, September 13th (T+1), unnecessarily early.
The Series 65 exam tests your ability to calculate settlement dates and advise clients on timing for liquidity needs. Understanding T+1 settlement (changed from T+2 in May 2024) is critical for ensuring clients have access to funds when needed and avoiding liquidity issues.
What is the regular-way settlement period for equity securities trades?
B is correct. Regular-way settlement for equity securities (stocks) is T+1, meaning trades settle one business day after the trade date. This has been the standard since May 28, 2024, when the SEC shortened the settlement cycle from T+2 to T+1.
A (T+0) describes cash settlement, which occurs on the same day but is not regular-way settlement. C (T+2) was the settlement period for equities and most other securities from September 2017 to May 2024; as of May 2024, most securities including equities, corporate bonds, and municipal bonds settle T+1. D (T+3) was the old settlement standard before 2017 and is no longer used for regular-way trades.
The Series 65 exam frequently tests knowledge of the T+1 settlement standard for equities. This is fundamental to understanding trade processing, payment timing, margin requirements, and client account management. Confusing settlement periods across security types is a common exam trap.
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B is correct. U.S. Treasury securities settle on a T+1 basis (one business day after trade date). With a Tuesday trade date (October 10th), settlement occurs Wednesday, October 11th.
A (same day/T+0) would apply to cash settlement, not regular-way Treasury settlement. C (T+2) was the settlement period for most securities before May 2024; as of May 2024, most securities including equities, Treasuries, corporate bonds, and municipal bonds settle T+1. D (T+3) is not a current settlement standard for any regularly traded securities.
The exam tests your knowledge of current settlement periods. As of May 2024, most securities including U.S. Treasuries, equities, corporate bonds, and municipal bonds all settle T+1. This standardization simplifies settlement calculations and affects timing of payments, delivery, and account funding requirements.
All of the following statements about settlement dates are accurate EXCEPT
C is correct (the EXCEPT answer). Trade date and settlement date are NOT always the same. For regular-way settlement, there is a gap between trade date (when the transaction executes) and settlement date (when payment/delivery occurs). Only cash settlement (T+0) transactions settle on the same day as the trade.
A is accurate: settlement date is indeed when ownership transfers and payment is exchanged. B is accurate: equities settle T+1 as of May 2024 (previously T+2). D is accurate: settlement dates are calculated using business days only, excluding weekends and holidays.
The Series 65 exam tests your ability to distinguish between trade date (order execution) and settlement date (completion of transaction). Confusing these dates can lead to errors in calculating when clients need to pay for purchases or when they can access proceeds from sales.
A client sells 500 shares of common stock on Friday, March 3rd, and purchases U.S. Treasury bonds on the same day. Monday, March 6th is a market holiday. Which of the following statements are accurate?
1. Both the stock sale and Treasury bond purchase will settle on Tuesday, March 7th
2. The stock sale will settle one business day after the trade date
3. The Treasury bond purchase will settle on the same day as the stock sale
4. Both transactions will be completed within the same week
D is correct. All four statements are accurate.
Statement 1 is TRUE: Both the stock sale (T+1) and Treasury bonds (T+1) settle one business day after the Friday, March 3rd trade date. Counting business days: Saturday and Sunday are not business days, Monday, March 6th is a holiday (not a business day), so Tuesday, March 7th is the first business day after trade (T+1). Both transactions settle Tuesday, March 7th.
Statement 2 is TRUE: The stock sale settles T+1 (one business day after trade) as of May 2024. From Friday, March 3rd, skipping the weekend and Monday holiday, the first business day is Tuesday, March 7th.
Statement 3 is TRUE: Since both equities and Treasuries now settle T+1, they settle on the same day when traded on the same date. Both settle Tuesday, March 7th.
Statement 4 is TRUE: Both transactions settle during the week of March 5-11 (Tuesday of that week), so they are completed within the same week.
The Series 65 exam tests your ability to calculate settlement dates while accounting for weekends and holidays. As of May 2024, both equities and Treasuries settle T+1, simplifying settlement calculations. Understanding this change from the previous T+2 standard for equities is critical for managing client expectations and ensuring proper account funding.
💡 Memory Aid
T+ONE for almost everything = ONE business day after Trade. Think "Trade Today, Own Tomorrow" (T+1, changed May 2024 for most securities). Stocks, Treasuries, corporate bonds, municipal bonds all T+1. Cash settlement = instant gratification (T+0). Always count BUSINESS days, never weekends or holidays.
Related Concepts
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Where This Appears on the Exam
This term is tested in the following Series 65 exam topics: