Understanding settlement helps you know when funds and securities are available for use.
What is settlement?
Settlement is the process of transferring securities and funds between buyer and seller after a trade executes. During settlement:
- The buyer's payment is transferred to the seller
- The seller's securities are transferred to the buyer
Settlement timeline (T+1)
Most securities settle one business day after the trade date (T+1).
| You trade on | Settlement completes |
|---|---|
| Monday | Tuesday |
| Tuesday | Wednesday |
| Wednesday | Thursday |
| Thursday | Friday |
| Friday | Monday |
How settlement affects you
Selling securities:
- After selling, proceeds are available for buying other securities immediately
- Withdrawing cash to your bank requires waiting for settlement
Buying securities:
- Shares appear in your portfolio immediately but aren't settled for T+1
- Selling unsettled shares may result in a Good Faith Violation
Good Faith Violations
A Good Faith Violation occurs when you:
- Buy a security using unsettled funds
- Sell that security before the funds used to buy it have settled
Three Good Faith Violations within 12 months may result in account restrictions.
Keep in mind
Cash accounts must use settled funds. Margin accounts provide more flexibility with unsettled funds.