Settlement.
In plain English
Settlement is the back-office step where a completed trade becomes final, with the buyer's cash and the seller's shares officially swapped and recorded. When you click buy or sell, the trade executes instantly, but the legal transfer happens a short time later on the settlement date. In the United States, stocks and most securities settle T+1, meaning one business day after the trade date (this changed from T+2 on May 28, 2024). Until settlement happens, you technically do not fully own the cash or shares yet, which matters for things like withdrawing proceeds.
01Why it matters
Settlement timing controls when your money is truly available. Sell a stock on a Monday and the cash settles Tuesday, so trying to withdraw it instantly or buy and re-sell too fast can trigger trading violations in a cash account.
02The math, step by step
You sell 20 shares for $1,000 on a Wednesday. The trade executes right away, but settlement (T+1) finalizes the next business day, Thursday. If Thursday is a holiday, it pushes to the next business day. You should not assume the $1,000 is withdrawable until settlement completes.
03What this is NOT
Execution is when your order fills and a price is locked, which feels instant. Settlement is the separate, slightly later step (T+1) when the cash and shares legally change hands and the trade becomes final.
04Receipts
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Plain-English answers from our glossary. Receipts included. Never advice.
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