How markets work
Settlement
Also called T+1 or T+2
The process of actually exchanging cash for securities after a trade is agreed.
How it works
A trade and its settlement are separate events. You agree the price on trade date, and ownership and money move on settlement date — one business day later in most major markets, having been two until recently.
Until settlement completes, the proceeds of a sale are not fully yours to withdraw, though most brokers will let you reinvest them immediately.
Where it misleads people
The gap catches people around dividends and tax year ends. To be on the register for a dividend, or to have a disposal fall in a given tax year, what matters is the settlement convention, not the day you pressed the button.
Related terms
- Ex-dividend dateThe first day a share trades without the right to the next dividend.
- Record dateThe date on which a company checks its register to see who is entitled to a dividend.
- CustodianThe institution that physically safeguards the securities you own.
- Contract noteThe document a broker issues after a trade, recording exactly what was bought or sold and at what price.
Mentioned in
More in How markets work
- Short interest
- Securities lending
- Short selling
- Payment for order flow
- Short squeeze
- Order book
- Slippage
- Nominee account
All 33 How markets work terms · The full glossary, 433 terms
Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.