T+1 Settlement: Counting Trade Settlement Dates After the Switch

Since 28 May 2024, standard settlement for US equities, corporate bonds and municipal securities is T+1: one business day after the trade. Halving the cycle from T+2 removed a day of slack that a lot of operational processes were quietly relying on, and it made getting the count right matter more than it used to.

Trading days, not business days

The single most important thing about settlement arithmetic is that it counts exchange trading days, and the market calendar is not the federal holiday calendar. They overlap heavily and then diverge in exactly the places that cause errors:

• Good Friday closes the NYSE but is not a US federal holiday. A business-day counter built on the federal calendar will settle a trade on a day the market is shut.
• Columbus Day and Veterans Day are federal holidays on which the equity market trades normally — but the banks are closed, so neither is a settlement day. A trade on the Friday before Columbus Day settles on the Tuesday, not the Monday, and so does a trade made on Columbus Day itself. A counter built only on the exchange calendar will settle a trade on a day nothing settles. The bond market closes on both days as well.

This is why a settlement calculation needs both calendars at once: a settlement day is a day the market is open and the banks are open. Count on the civil calendar alone and you settle on Good Friday; count on the exchange calendar alone and you settle on Columbus Day and Veterans Day. Either error is silent.

How the count works

T is the trade date. T+1 is the next trading day. A trade executed on Monday settles Tuesday. A trade executed on Friday settles the following Monday, because Saturday and Sunday are not trading days. A trade executed on the Wednesday before Thanksgiving settles on the Friday, since the market is closed on the Thursday — and that Friday is a half day, which affects cut-offs even though it is a full settlement day.

Under SEC Rule 15c6-1, a broker-dealer may not effect or enter into a contract for the purchase or sale of a security that provides for payment and delivery later than the first business day after the trade date, unless the parties expressly agree otherwise at the time of the transaction.

What T+1 actually compressed

The date arithmetic is the easy part. What the move to T+1 changed is that affirmation and allocation now have to happen on trade date rather than the morning after. The industry standard is affirmation by 9:00 p.m. Eastern on T. For a manager operating from London or Singapore, that is the evening or the middle of the night, and the process that used to absorb a mistake overnight no longer can.

Two knock-on effects are worth naming because they are date problems in disguise:

• FX funding mismatch. Spot FX conventionally settles T+2. A foreign investor buying US securities now has to fund a T+1 settlement with currency that arrives a day later, which forces either pre-funding or same-day FX.
• Cross-border misalignment. Canada and Mexico moved to T+1 alongside the US. The UK and EU had not at the time of the US move, so a dual-listed position or an ADR could have one leg settling a day before the other — a genuine funding gap rather than a rounding difference.

Not everything settles T+1

The standard cycle covers most equities, corporate and municipal bonds, ETFs, ADRs and unit investment trusts. Several things sit outside it:

• US Treasury securities conventionally settle T+1 already, and have for a long time.
• Options settle T+1, but exercise and assignment have their own timetable.
• Mutual funds settle on their own schedule, commonly T+1 but set by the fund.
• New issues and when-issued trading settle on the terms of the offering.
• Ex-dividend dates moved with the cycle. Under T+1 the ex-date is the record date, not the day before it — if you are counting to establish entitlement to a dividend, that shift matters more than the settlement date itself.

Count against the right calendar

If you take one operational rule from this: never compute a settlement date with a tool that does not know what a market holiday is. The failure is not dramatic — you get a date, it looks plausible, and it is off by one on a handful of days a year. Those days are Good Friday, Columbus Day and Veterans Day, and they are entirely predictable in advance.

The T+1 Settlement Date calculator counts settlement days — days the NYSE is open and the banks are open — so Good Friday, Columbus Day and Veterans Day are all excluded. There is a separate NZX version for New Zealand trades, which observes a different set again.

General information about settlement conventions, not investment or financial advice. Settlement terms for a specific instrument are set by its market, its documentation and your broker — confirm them before relying on a date.