Regular Business Days From Trade Date; Dates/terms To Settle Instruments
Settlement of stocks is a T+3 procedure, which means that when you buy a stock it takes three business days from the transaction date, T, for the stock purchase to be entered into the company's record books. Below is a table exhibiting a weekend T+3 settlement of stock
| Instrument | Days to Settle in US |
|---|---|
| Stocks | 3 (3 days after trade date or "T + 3") |
| Money Market Mutual Fund | Typically 1 ("T + 1" or "next day"), though can be 0 ("same day") |
| Options | 1 |
It is important to note that, in the U.S., the settlement date/terms for a securities trade is also associated with the character or basis on which the securities trade and settle:
- Regular way (RW) – that is, the normal time frames and manner – example, stocks normally are T+3
- When issued (WI) – short for "when, as, if issued" – signifying a conditional transaction in a security authorized for issue which has not yet been or may never be actually issued. Settlement occurs if and when the security is actually issued and/or the exchange or NASD/FINRA rules that the trades are to be settled. Based on the nature of some securities, sometimes when issued's are never actually issued. For example, US Treasury securities, stock splits and new issues typically trade on a "WI" basis
- Cash – same day settlement, that is, delivery on trade date.
- Delayed delivery (DD) – securities are expected to be delivered past normal timeframes/windows. Example, new issue muni's (municipal bonds) often trade on a DD or WI basis (often a month after trade date as disclosed in the note of sale to allow for printing and shipping of the debenture/certificates). Like equities though, muni's can be settled RW, WI or cash, as well as DD or other mutually agreed terms.
- Ex-dividend – the terms of the stock trade are that the price and settlement amount "excludes" a pending dividend declaration (buyers of a stock on or after ex-dividend declaration date but prior to payable date).
- Ex-rights – similar in effect as ex-dividend. A security that trades/settles without any entitlement to a pending rights offering declared on the stock.
Read more about this topic: Settlement (finance)
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