T+1 (T+2,T+3)

What is T+1 (T+2,T+3)?

T+1 (T+2, T+3) abbreviations refer to the settlement date of security transactions. The numbers, refers to the number of days it takes to settle a financial transaction. The numbers 1, 2 or 3 denote how many days after the transaction date the settlement or the transfer of money and security ownership takes place. The T stands for transaction date, which is the day the transaction takes place.

Settlement dates vary, according to the type of security. Treasury bills, for instance, are about the only security that can be transacted and settled on the same day. All stocks and most Mutual Funds are currently T+2; however, Bonds and some Money market funds will vary between T+1, T+2 and T+3.

How T+1 (T+2, T+3) Settlement Works

For determining the T+1 (T+2, T+3) settlement date, the only days counted are those on which the stock Market is open.

• T+1 means that if a transaction occurs on a Monday, settlement must occur by Tuesday.

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• T+3 means that a transaction occurring on a Monday must be settled by Thursday, assuming no holidays occur between these days.

• But if you sell a security with a T+3 settlement date on a Friday, ownership and money transfer does not have to take place until the following Wednesday.