T+3
From MarketsWiki
T+3, refers to the number of days it takes to settle stock in the United States; thus T+3 really refers to the trade day plus 3 days[1].
Breaking it down, 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.[2]
An investor buying a security on Monday is not required to pay for that purchase until Thursday, so in essence, the broker has extended a three-day window or extension of credit to the customer. As a result, the customer can still trade while the earlier transaction/s are being cash settled, while making a good-faith promise to fully pay settled funds or deposit securities within the three-day settlement period and not to sell before making such payment.
References
- ↑ Settling Securities Transactions, T+3. U.S. Securities Exchange Commission. Retrieved on April 27, 2008.
- ↑ Glossary. CME. Retrieved on April 28, 2008.
