For a U.S. stock trade, what does T+1 settlement mean?

For a U.S. stock trade, T+1 settlement means settlement occurs one business day after the trade date.

The letter T represents the transaction or trade date, while the number indicates the number of business days until settlement. Settlement is when the buyer receives the securities and the seller receives the cash through the market’s clearing and settlement process. The interval is not simply one calendar day because weekends and applicable market holidays do not count as business days.

The United States moved from T+2 to T+1 settlement for most broker-dealer securities transactions on May 28, 2024. The change shortened the period during which a trade remains unsettled and was intended to reduce counterparty and operational risk.

T+1 does not mean that an order must remain open for a day before execution. A trade can execute immediately during market hours; the term concerns the later completion of delivery and payment. Some instruments and transactions follow different schedules.