How long is settlement time period (T+2) for stock trade funds at Ally Invest, Charles Schwab, Robinhood, Merrill Edge, and Vanguard.

Have you ever noticed that when you place a trade for a stock or mutual fund, there’s something called the settlement date that appears on your confirmation? And if the trade is a sale, you can’t use those funds until the settlement date. You really need to be aware of this nuisance so that you won’t try to withdraw your funds just to find out that you can’t for a few days.

History of Settlement Date

Settlement is simply the exchange of money for securities that have been purchased. In years past, before the advent of the computer, automobiles, and the like, settlement could occur days or even weeks after the trade was completed. Horses and ships just couldn’t transfer money and hand-written securities in a matter of days.

Things began changing in the latter half of the 20th century when computers made their entrance into the investment world. Settlement dates dropped to just seven days, and then five, and then three.

Finally, the United States dropped to just two days in September of 2017. This change was once again made primarily due to changes in technology and the speed that transactions were consistently being completed. Reducing settlement times reduces risk in the financial system, which was another incentive to shorten the settlement by another day.


The current American settlement date is written as T+2. T stands for the trade date, and the 2 represents 2 business days later. (Notice that this is business days, and not days.) The older system can be expressed as T+3 or T+5, etc.

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Foreign Markets

Some foreign countries have transitioned to T+2 as well. Most European countries, for example moved to T+2 in 2014. Australia also uses T+2 as of 2016. Hong Kong uses T+2, although some trades settle on the trade date. When the U.S. went to T+2, so did Canada and Mexico.

How to Shorten T+2

While it’s not possible to trade a stock on a U.S. exchange without a settlement period, there are certain ways to circumvent the settlement date. This will allow you to receive payment more quickly from sales. You need to remember the flip side of this, though. Payments for purchases must also be made more quickly.

We have some ideas for you if you want to short your settlement dates. Vanguard, for example, offers T+1 trading on Vanguard mutual funds.

Trades placed on the Shanghai-Hong Kong Stock Connect settle on the trade date

Option trades in the United States (and in other countries) operate on a T+1 basis. So if settlement were important to you and you wanted to take a bullish position on a stock, instead of buying the stock you could buy a call option. This is a bullish bet on the underlying stock, and the purchase comes with T+1 settlement instead of T+2.

If you wanted to take a short position, you would buy a put, and this too would settle one day after the trade date.

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