Settlement date

The settlement date is the day a securities trade officially completes, when cash actually changes hands and legal ownership of the shares transfers from seller to buyer. It comes after the trade date, the day the order actually executed, because the exchange, brokers, and clearing systems need a short processing period to finalize the transfer rather than completing it the instant the trade happens.

For most US stock trades, settlement now happens one business day after the trade date, a standard known as T+1, meaning a trade executed on a Monday generally settles on Tuesday. Until settlement is complete, the seller has sold the shares and the buyer has bought them in the sense that the price is locked in, but the actual delivery of shares and cash has not yet finished, which is why a security sold before its own purchase has settled can trigger a good faith violation in a cash account.

The settlement date matters for more than just internal bookkeeping. Dividend eligibility, for example, depends on holding shares as of a specific record date, and how the trade date relates to settlement affects whether a given purchase or sale counts in time. Investors moving cash between accounts also need to account for the settlement date, since proceeds from a sale are not fully available to withdraw or reinvest with certainty until the trade has actually settled, not merely executed.