Stats › Active, passive and flows › Settlement cycle
The settlement cycle
When you click buy, the deal is struck immediately but the shares and the money don't actually change hands right then. There's a gap, and that gap is the settlement cycle. In US equities it's currently one business day, which the industry writes as T+1. Most of the time you never notice it. It's the reason you can't always spend the proceeds of a sale the same afternoon, and it's the reason a whole layer of collateral exists behind the scenes.
This page covers when the US moved to T+1, what the cycle was before that going back to the days of paper certificates, why regulators care about the length of it at all, and what actually changed once the shift happened. There are real measured numbers for that last part rather than the usual claims: how much collateral came out of the clearing system, how firms' behaviour changed, and what happened to trades that failed to settle.
It's plumbing, and plumbing rarely gets written up in plain language, which is exactly why I wanted it here. There's also something on this page I deliberately don't claim, because the data to support it wasn't available. The sources are official filings and an industry after action report, all linked and dated at the bottom, and they're readable if you want to go further than this summary.
US equities have settled on T+1, meaning one business day after the trade, since 28 May 2024. The prior cycle was T+2 from 2017, before that T+3 from 1995, and T+5 before that. The change worked: trade affirmation rates rose from 73% to about 95%, and the NSCC clearing fund fell by about $3.0 billion, a 23% reduction, because less time between trade and settlement means less accumulated counterparty risk to collateralise.
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