T+1 (T+2,T+3)

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DEFINITION

Abbreviations that refer to the settlement date of security transactions. The T stands for transaction date, which is the day the transaction takes place. The numbers 1, 2 or 3 denote how many days after the transaction date the settlement or the transfer of money and security ownership takes place.

INVESTOPEDIA EXPLAINS

For determining the settlement date the only days that are counted are those on which the stock market is open. T+1 means that if a transaction occurs on a Monday, settlement must occur by Tuesday. Likewise, T+3 means that a transaction occurring on a Monday must be settled by Thursday, assuming no holidays occur between these days. But if you sell a security with a T+3 settlement date on a Friday, ownership and money transfer does not have to take place until the following Wednesday.

Do not, however, think of the period between transaction and settlement as a flex time in which you can back out of the deal. The deal is done on the transaction day--it's just the transfer that does not take place until later.


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