Settlement Period

AAA

DEFINITION of 'Settlement Period'

The period of time between the settlement date and the transaction date that is allotted to the parties of a transaction to satisfy the transaction's obligations. The buyer must make payment within the settlement period, while the seller must deliver the purchased security within this period.

INVESTOPEDIA EXPLAINS 'Settlement Period'

Depending on the type of security traded, the exact length of the settlement period will differ. The settlement period is often quoted as T+1, T+2 or T+3; which means the transaction date plus one, two or three days.

For stocks, the settlement period is three days (T+3) after the transaction. This means that the buyer must transfer cash to the seller, and the seller must transfer ownership of the stock to the buyer within three days after the trade was made.

For certificates of deposit and commercial paper, the transaction must be settled on the same day. For U.S. treasuries, it is the next day (T+1), and forex transactions are settled two days after (T+2).

RELATED TERMS
  1. Fictitious Trade

    1) A trade that is booked with an execution date far in the future, ...
  2. Contract Month

    The month in which a futures contract expires. The contract can ...
  3. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, ...
  4. Delivery Date

    1. The final date by which the underlying commodity for a futures ...
  5. Settlement Date

    1. The date by which an executed security trade must be settled. ...
  6. T+1 (T+2,T+3)

    Abbreviations that refer to the settlement date of security transactions. ...
Related Articles
  1. Mutual Funds & ETFs

    Playing It Safe In Foreign Stock Markets

    Find out some of the lower-risk ways to invest in foreign markets.
  2. Retirement

    What do T+1, T+2 and T+3 mean?

    Whenever you buy or sell a stock, bond or mutual fund, there are two important dates of which you should always be aware: the transaction date and the settlement date. The abbreviations T+1, ...
  3. Options & Futures

    Do I own a stock as of the trade date or the settlement date?

    When it comes to buying shares, there are two key dates involved in the transaction. The first date is the trade date, which is simply the date that the order is executed in the market. The second ...
  4. What's a Marketable Security?
    Active Trading

    What's a Marketable Security?

    Marketable securities are financial instruments that can be readily bought and sold in a public market. The key feature is the ease with which it can be sold and converted into cash. Usually, ...
  5. Stock Analysis

    Buyinb Facebook Stock, A Beginner's Guide

    This straightforward guide helps the novice investor feel more adept at buying a stock, such as Facebook (FB).
  6. Trading Strategies

    How do technical analysts interpret the Average Directional Index (ADI)?

    Learn what the average directional index is and why technical analysts look towards ADX indicators to measure the strength of price trends.
  7. Investing News

    Alibaba's Top Competitors

    A look at Alibaba’s top competitors to understand perceived and real competitive threats to the Chinese ecommerce giant.
  8. Investing Basics

    Analysis of Companies with high goodwill

    High goodwill as a percentage of market cap can actually be a big red flag--it potentially means the company botched a major acquisition.
  9. Investing Basics

    What Does The Dow Jones Industrial Average (DJIA) Quote Represent?

    “The Dow” is regarded as the “pulse of the stock market,” as it is one of the most quoted and followed stock market indices by investors, market professionals and media.
  10. Investing

    What are the differences between dilutive securities and antidilutive securities?

    Learn how investors and accountants apply the terms "dilutive" and "antidilutive" to securities or the exercise of security mechanisms.

You May Also Like

Hot Definitions
  1. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  2. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  3. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  4. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  5. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  6. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
Trading Center