T+1 settlement

T+1 settlement is the current US standard requiring most stock trades to settle one business day after the trade date. A trade executed on a Monday settles on Tuesday, and a trade executed on a Friday settles on the following Monday, assuming no holidays fall in between. The notation itself simply means trade date plus one business day.

The US market moved to this standard from a longer two day settlement cycle, shortening the gap between when a trade executes and when cash and shares actually change hands. A shorter settlement cycle reduces settlement risk industry wide, since there is less time for something to go wrong between execution and completion, and it frees up cash and securities for reinvestment faster than a longer cycle would.

For an individual investor, T+1 settlement mostly affects how quickly proceeds from a sale become fully available and how quickly a related follow-up trade can be made without running into a good faith violation in a cash account. It also changes the timing window in which corporate actions like dividend eligibility, which depend on holding a position through a specific record date relative to the trade date, get calculated, since the shorter settlement window shifts exactly when a trade needs to happen to count in time.