T+1 settlement: what changed on May 28, 2024
Explain T+1 settlement on US equities and why the SEC shortened the cycle.
Lesson path
Stocks, ETFs, and Equities Macro
T+1 Settlement and Equity Mechanics
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Explain T+1 settlement on US equities and why the SEC shortened the cycle.
From T+2 to T+1: the quiet revolution
On May 28, 2024, the United States compressed its equity settlement cycle from two business days to one. If you sold Apple shares on a Tuesday before that date, the cash hit your account on Thursday. After the change, it lands Wednesday. Your broker app looks the same. The clearing plumbing behind it does not.
Why did the SEC push this? Two big reasons. First, risk reduction. When trades sit unsettled for two days, the clearing house carries that exposure. Shorten the window and the systemic risk during a market shock drops. The meme-stock chaos of January 2021 — where brokers had to post massive margin to back trades that had not yet settled — was the moment everyone agreed T+2 was a relic. Second, capital efficiency. Money locked against unsettled trades is money not earning anything. T+1 unlocks roughly half of that capital industry-wide.
What does this mean for you as a retail trader? In most cases, almost nothing. Day trading still works the same way. Your buying power refreshes the next day. The change matters most for international investors funding US trades in foreign currency, for short sellers managing borrows, and for anyone holding settled-cash accounts where every dollar has to clear before it can be used again.
Recap: US equities settle T+1 as of May 28, 2024. Trade today, cash and shares move tomorrow. Less counterparty risk, more capital efficiency, same retail experience on the surface.
Knowledge check
Answer before moving on.
1. You buy 10 shares of NVDA on Wednesday. When does settlement officially happen?
2. What was the main motivation for moving to T+1?
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