Glossary
Settlement
The final step of a trade, when the buyer’s cash and the seller’s securities actually change hands; most US stock trades settle one business day later (T+1).
Settlement is the moment a trade is completed for good: the buyer's money is delivered to the seller, and ownership of the securities is transferred to the buyer. Clicking "buy" creates a binding trade at once, but the exchange of cash and shares happens later, on the settlement date. The gap matters because it decides when sale proceeds can be withdrawn or reused, and it drives several account rules.
How it works in the US
Since May 28, 2024, most US stock, ETF, corporate-bond and listed-option trades settle on T+1, one business day after the trade date. Before that the standard was T+2. Behind the scenes, a clearinghouse (for stocks, the DTCC's National Securities Clearing Corporation) nets millions of trades and guarantees that each side gets what it is owed, so a buyer is not exposed to the failure of whoever happened to sell.
Why it matters to you
In a cash account, buying with money from a sale that has not settled yet and then selling the new position before that money arrives can trigger a good-faith violation. Settlement also sets dividend eligibility: with T+1, the ex-dividend date and the record date usually fall on the same day, so you must buy before the ex-date to receive the payment. Margin accounts smooth over most of these timing issues, at the cost of borrowing.