DEFINITION of 'T+1 (T+2,T+3)'

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.

BREAKING DOWN 'T+1 (T+2,T+3)'

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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