Settling Securities Transactions, T+3
Investors must complete or "settle" their security transactions within three business days. This settlement cycle is known as "T+3," shorthand for "trade date plus three days."
T+3 means that when you buy a security, your payment must be received by your brokerage firm no later than three business days after the trade is executed. When you sell a security, you must deliver to your brokerage firm your securities certificate no later than three business days after the sale.
The three-day settlement date applies to most security transactions, including stocks, bonds, municipal securities, mutual funds traded through a brokerage firm, and limited partnerships that trade on an exchange. Government securities and stock options settle on the next business day following the trade.
Options on futures contracts also settle on the next business day following the trade. Futures contracts themselves settle the day of the trade.
The first day of the three-day settlement cycle starts on the business day following the day you purchased or sold a security. For example, let's say you bought a stock on Friday at anytime during the day. Saturday and Sunday are not considered business days, so the three-day clock doesn't start running until Monday. Your payment or check must arrive at your broker's office by the close of business on Wednesday.
This article incorporates public domain material from the United States Government document "About Settling Trades in Three Days, United States Securities and Exchange Commission".