Settlement Date
The settlement date is the day a trade is finalized, when the buyer's money and the seller's securities officially change hands.
When you buy or sell a stock, the trade happens instantly on the trade date, but the actual exchange of money and shares takes place a little later, on the settlement date. Until then, the trade is executed but not yet settled.
In the United States, most stock and ETF trades now settle one business day after the trade date, a cycle known as T+1. The US moved to T+1 in May 2024, after many years of T+2 and, before that, T+3. Other markets and other types of securities may use different cycles.
Settlement matters in several practical situations. In a cash account, using the proceeds of a sale to buy something else and then selling that before the first sale settles can create a violation known as freeriding. Settlement also determines whether you are a shareholder of record in time to receive a dividend, which is why the ex-dividend date is tied to it.
Example: you sell shares on a Monday. Under T+1, the trade settles on Tuesday, and the cash becomes fully settled in your account that day. If Tuesday is a market holiday, settlement moves to the next business day.