As of May 28th, 2024, a significant industry-wide change is underway: the transition to a one business day (T+1) trade settlement period. Currently, transactions settle two business days after the trade date (T+2).

What is T+1 Settlement?

T+1 settlement simplifies the process by which securities transactions are finalized. Put simply, if you execute a trade on a Monday, the settlement—official transfer of securities and payment—will occur on Tuesday.

Why the Change?

Driven by technological advancements and investor demand for quicker settlement times, the move to T+1 enhances efficiency and reduces certain risks associated with trading and portfolio management.

What Securities are Affected?

Stocks, bonds, exchange-traded funds (ETFs), certain mutual funds, municipal securities, Real Estate Investment Trusts (REITs), and master-limited partnerships (MLPs) traded on U.S. exchanges will transition from T+2 to T+1 settlement.

What Does This Mean for You?

• Quicker Access to Funds: With the shortened settlement cycle, you'll receive trading proceeds faster, enabling you to reinvest more promptly.

• Enhanced Trading Experience: This change provides a more seamless and efficient trading experience on our platform, allowing you to execute investment strategies with greater flexibility.

Preparing for the Change

While the transition to T+1 settlement requires no action on your part, it's essential to familiarize yourself with the new settlement timeline. Consider any adjustments to your trading, portfolio management, or tax planning strategies accordingly.

Potential Tax Implications

With T+1 settlement, investors have only one business day to make necessary adjustments to their cost basis for tax purposes. This may impact decisions related to investment costs and the calculation of capital gains or losses.

FAQs

To address common queries, we've compiled a list of frequently asked questions about T+1 settlement:

1. Will T+1 settlement affect the way I trade? For the average investor, the change is unlikely to require significant adjustments to trade execution. However, understanding the new timeline is crucial for timely decision-making.

2. How does T+1 settlement benefit investors? Shorter settlement cycles increase efficiency and security, potentially reduce risks, and offer greater convenience for specific investment strategies or tax planning purposes.

3. Are government bonds included in the T+1 settlement change? No, government bonds already settle at T+1, so there's no change for these securities.

Firstrade is here to support you at every step of your trading journey. If you have any questions or need assistance, please visit our Help Center or contact our Client Service team.