Trade Day + 3 Days
In the United States, stocks take three days to settle. If you buy on Monday, you don't pay for the purchase until Thursday. This is known as trade day plus 3 days or T+3.
This three day settlement period is considered an extension of credit from the broker to the customer. Because the transaction is considered a credit issue, the Federal Reserve Board is responsible for the rule which is officially called Regulation T.
If a brokerage customer is approved for margin on the account there will be a line of credit to "cushion" the three day settlement period. This credit allows customers to trade while the cash settles. For accounts without margin (cash accounts), stock traders must have enough cash in the account to pay for any purchases the day they are due. A client in good faith agrees to make full payment of settled funds or deposit securities within the three day settlement period and not to sell before making such payment.
Read more about this topic: Free Riding
Famous quotes containing the words trade, day and/or days:
“... it must be obvious that in the agitation preceding the enactment of [protective] laws the zeal of the reformers would be second to the zeal of the highly paid night-workers who are anxious to hold their trade against an invasion of skilled women. To this sort of interference with her working life the modern woman can have but one attitude: I am not a child.”
—Crystal Eastman (1881–1928)
“When I heard at the close of the day how my name had been receiv’d
with plaudits in the capitol, still it was not a happy night for me
that follow’d,
And else when I carous’d, or when my plans were accomplish’d,
still I was not happy,
But the day when I rose at dawn from the bed of perfect health,
refresh’d, singing, inhaling the ripe breath of autumn,”
—Walt Whitman (1819–1892)
“Some days your hat’s off to the full-time mothers for being able to endure the relentless routine and incessant policing seven days a week instead of two. But on other days, merely the image of this woman crafting a brontosaurus out of sugar paste and sheet cake for her two-year-old’s birthday drives a stake through your heart.”
—Melinda M. Marshall (20th century)