T+1 Settlement
The settlement standard requiring US securities trades to be finalized within one business day of the transaction date.
What is T+1?
T+1 settlement means that the exchange of cash and securities between the buyer and seller of a security must be completed within one business day after the trade date (T). The United States, Canada, and Mexico moved from T+2 (two-day settlement) to T+1 on May 28, 2024, following an SEC rule change designed to reduce counterparty risk, free up collateral in the financial system, and align with global best practices. Under T+1, a stock trade executed on Monday must settle by Tuesday — the buyer's broker delivers cash and the seller's broker delivers shares within that window. The accelerated settlement reduces the period during which either party can default before the trade is finalized, shrinking settlement risk. Retail investors rarely interact directly with settlement mechanics, as brokerage firms handle the process automatically.
Example
During the January 2021 GameStop short squeeze, the two-day settlement period (T+2) became a flashpoint: Robinhood and other brokers had to post billions in margin to the DTCC (Depository Trust & Clearing Corporation) as collateral against unsettled trades, temporarily forcing them to restrict buying. The episode accelerated regulatory push for T+1, with the argument that shorter settlement periods reduce the collateral requirements and systemic risks that brokers must manage during periods of market stress.