Investing 101

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New T+1 settlement rules that went into effect yesterday offer investors quicker access to cash from selling.

The new T+1 settlement went into effect yesterday.

So, what’s T+1 settlement?

Well, whenever you buy or sell a stock, there needs to be some time for the shares and cash to transfer. This is called settling.

Before yesterday, the SEC required this process to be completed in 2 days.

So if you sold shares on Tuesday, you wouldn’t receive the cash until Thursday.

This was called T+2.

Under the new rules, transfers must now finish in 1 day. Hence, T+1.

So, for those same shares you sold on Tuesday, you’d get the cash now on Wednesday.

So, how does this impact the market?

We don’t see a significant impact for institutional investors.

But, we do see a benefit for retail investors like you.

With shorter transaction timing, you’ll be able to get cash from selling sooner.

Settlement timing has been getting shorter and shorter as financial technology evolves. Hopefully, the next step will be instant!

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The statements, opinions and analyses presented here are provided as general information. This article is the opinion of the author. Anything within this article should NOT be considered an investment recommendation or advice. See Ursa’s full disclosures here.

Original Photo by John Guccione.