GLOSSARY // Market Structure
T+1 Settlement
T+1 settlement means a securities trade becomes final one business day after the trade date: sell stock on Tuesday and the cash is officially yours Wednesday. The US moved from T+2 to T+1 on May 28, 2024, halving the window between execution and settlement.
During that window the trade exists but ownership has not legally transferred — the Depository Trust Company nets and moves the shares and cash on settlement day. The gap is why cash-account traders can trigger good-faith violations by spending unsettled proceeds, and why the ex-dividend calendar is anchored to settlement mechanics.
Shortening the cycle cut clearinghouse margin requirements and shrank the pile of unsettled risk in the system — a direct response to the January 2021 meme-stock episode, when two days of exposure forced brokers to post billions in collateral and restrict buying.
An investor sells $25,000 of stock in a cash account on Monday. Under T+2 the cash settled Wednesday; under T+1 it settles Tuesday, and the investor can buy a new position Tuesday and sell it without violation. Buying Monday afternoon with the unsettled proceeds and selling that same buy on Monday would still risk a good-faith violation.
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Educational only — not financial advice. Definitions simplified for clarity; markets are messier than definitions.