The standard number of business days in which a securities transaction is completed and paid for between broker dealers. Corporate securities, ETFs, Government securities, options and municipal bonds all settle regular way on the business day after the trade date, also known as T+1. The settlement cycle for corporate and municipal securities was reduced from T+2 to T+1 on May 28th 2024.
Regular way settlement is set under the Uniform Practice Code. Broker dealers must exchange cash and securities under the terms of regular way settlement as set by FINRA / NYSE. The settlement date is also the day when the customer who purchase the securities, becomes an owner of record. Owners of record are entitled to receive dividends paid to stockholders. Owners of record for bonds, earn interest as it accrues on debt securities. You should have a good understanding of settlement dates and their impact on trading, ex dates, payment dates and sellouts for your exam.
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