What happens after a stock trade is executed?

You sell a stock on Monday and see the trade in your brokerage account. Two dates can appear. One is the trade date, when the order was executed. The other is the settlement date, when the securities are delivered to the buyer and the payment goes to the seller. The gap gives firms time to carry out the exchange.

Read the clock in business days

The U.S. Securities and Exchange Commission shortened the standard settlement cycle for most covered broker-dealer securities transactions from two business days to one, with a compliance date of May 28, 2024. T means the trade date. T+1 means one business day later. The scope includes many stocks, bonds and exchange-traded funds, with exceptions described in the rule and guidance.

In an ordinary week a covered stock trade executed on Monday would usually settle on Tuesday. One executed on Friday would usually settle on Monday if Monday is a business day for settlement. A holiday can shift it later. The date shown on the trade confirmation is the one to use for the actual transaction.

Distinguish a fill from completed delivery

Suppose a fictional order to sell 20 shares fills at $30 each. The execution establishes a gross trade value of $600. Settlement is the next step, when the shares and cash are transferred. The terms and availability of cash for a withdrawal or another transaction can depend on the account and the broker. The brokerage may also display buying power, which describes what it permits in the account.

On a purchase, the same shorter cycle brings payment and delivery forward. The SEC’s bulletin says investors should be mindful of the shorter period and that brokers may require funds sooner. Use the broker’s dates and instructions for the actual trade.

Read the confirmation

• Find the execution date, quantity, price and any charges.
• Note the settlement date separately and account for business days.
• If you need to move the proceeds, check the account’s settled cash and withdrawal terms.

Different products and markets can follow different conventions. When a headline uses T+1, first check which market and which securities it is describing. Then translate the shorthand into the relevant dates.