About Settling Trades in Three Days

T+3 (buying securities)

Investors must settle their security transactions in three business days. This settlement cycle is known as "T+3" — shorthand for "trade date plus three days."

This rule means that when you buy securities, the brokerage firm must receive your payment no later than three business days after the trade is executed. When you sell a security, you must deliver to your brokerage firm your securities certificate no later than three business days after the sale. How you hold your securities (either in physical certificates or in electronic accounts) can affect how quickly you are able to deliver them to your broker. For more information, please read Holding Your Securities.

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History of T+3
Unsettled trades pose risks to our financial markets, especially when market prices plunge and trading volumes soar. The longer the period from trade execution to settlement, the greater the risk that securities firms and investors hit by sizable losses would be unable to pay for their transactions.

For many years, our markets operated on a "T+5" settlement cycle. But, nearly a decade ago, the SEC reduced the settlement cycle from five business days to three business days, which in turn lessened the amount of money that needs to be collected at any one time and strengthened our financial markets for times of stress.