From T+2 to T+1: How the New Settlement Timeline Changes Your Trading Strategy

When you execute a trade, it doesn’t instantly appear in your account. There’s a gap between the trade date—when you place your buy or sell order—and the settlement date, when the transaction officially completes and money/securities change hands. For nearly a decade, that gap has been two business days. But starting May 28, 2024, that timeline shrinks to just one day, marking another significant shift in how markets operate.

The Evolution of Settlement Speed

This shift to T+1 isn’t unprecedented. The SEC previously compressed settlement from T+3 to T+2 back in 2017. That earlier move was driven by technology improvements; this latest change represents the same logic taken further. With trading and banking now entirely digital, the old physical delivery days have become obsolete.

The new T+1 standard will align equities, bonds, ETFs, municipal securities, and certain mutual funds with options and government securities, which already operate on next-day settlement. FINRA’s conforming rule changes ensure consistency across the industry.

What T+1 Actually Means for Your Portfolio

Consider a practical scenario: You sell stock shares on a Tuesday. Under the current T+2 system, that transaction settles Thursday. Move to T+1, and it settles Wednesday instead.

For many investors with cash already sitting in their brokerage accounts, this change is transparent—nothing shifts operationally. But if you’re someone who funds purchases through Automated Clearing House (ACH) transfers from your bank, you face a critical timing adjustment. You can no longer wait until the day after your trade to initiate the transfer. That one extra day matters because the funds must actually arrive in your brokerage account before settlement completes, not merely be in transit.

The SEC also flagged physical securities holders. Though increasingly rare, if you still maintain paper certificates, you’ll need to deliver them to your broker-dealer one day sooner. Investors holding securities electronically—the modern standard—won’t face any action; their brokers handle earlier delivery automatically.

Who and What This Affects

The T+1 rule applies to the same asset classes currently under T+2: individual stocks, corporate bonds, municipal securities, exchange-traded funds, and eligible mutual funds trading on exchanges.

One nuance: margin account rules shift slightly. While margin requirements remain calculated on trade-date basis, Regulation T (initial) margin calls compress from T+5 to T+3. This doesn’t alter maintenance margin call timelines, which are still based on when the call originates.

Immediate Action Items for Investors

Now is the moment to contact your broker-dealer and clarify how T+1 affects your specific circumstances. Review your current settlement practices, particularly if you regularly use ACH funding. Adjust your transfer timing if needed to ensure payments land before the compressed settlement window closes.

The shift reflects modern market infrastructure—gone are the days when physical delivery logistics required multiple business days. For most investors, it’s an invisible improvement. But for those managing their own transfer timing, May 28, 2024, marks a meaningful operational deadline to prepare for.