What is a settlement date?

The settlement date is the date when a trade is final, and the buyer must make payment to the seller while the seller delivers the assets to the buyer. The settlement date for stocks and bonds is usually two business days after the execution date (T+2). For government securities and options, it's the next business day (T+1).

How long is a stock settlement period?

Different types of securities come with varied settlement periods, and the period may range anywhere from one day to three trading days since the trade date. The Securities and Exchange Commission (SEC) is the entity that has the power to set basic rules for stock trading in the United States.

What is the lag time between trade date and settlement date?

The lag time between the trade date and settlement date differs from one security to another. Settlement dates were originally imposed in an effort to mitigate against the fact that in earlier times, stock certificates were manually delivered, leaving windows of time where a stock's share price could fluctuate before investors received them.

When is a trade deemed settled?

The trade is deemed settled when the ownership of the security is transferred, the payment received, and the buyer becomes the new holder of the security. Different types of securities come with varied settlement periods, and the period may range anywhere from one day to three trading days since the trade date.