T+1 Settlement

Starting May 28, 2024, the standard settlement date for U.S. securities trades will be the next business day after a trade (T+1), changing from the current T+2 settlement cycle.

• The settlement for government bonds already follows the T+1 rule, and this will remain unchanged.
• Options trades will continue to settle in one business day, with no changes to this process.
• Business days are Monday through Friday, excluding stock market holidays and half-days.

What’s the new settlement rule? This industry-wide change, driven by advancements in technology and investor preferences for quicker settlements. Stocks, bonds, exchange-traded funds (ETFs), certain mutual funds, municipal securities, Real Estate Investment Trusts (REITs), and master-limited partnerships (MLPs) traded on U.S. exchanges will move from T+2 to T+1. The newT+1 rule means that the transaction will settle one business day after the trade date instead of two.

What does this mean for you? Generally, you won’t see significant changes in your account balances due to this new settlement date. However, proceeds from sales will be available one day earlier for cash withdrawals. Similarly, buy trades will require payment one day earlier as well.

What do you need to do? No action is required on your part. The new T+1 settlement period will automatically apply to all new trades executed on or after May 28, 2024.

What are the potential tax considerations? With T+1 settlement, you will have only one business day to adjust any cost basis decisions for tax purposes, rather than the current two days.

How does T+1 settlement benefit investors? Shorter settlement cycles can enhance the efficiency and security of securities trading, potentially reduce credit and operational risks, and offer greater convenience for investors who need quicker settlement times for specific strategies or tax planning purposes.

How does T+1 settlement affect ex-dividend dates? As a result of T+1 settlement, ex-dividend dates for dividends, distributions, and other corporate actions will now occur on the same day as the record date, instead of one business day before the record date.

Still have questions? Contact Firstrade Client Support