T+1 Settlement
Trade Date Plus One Settlement
A settlement cycle where securities transactions settle one business day after the trade date.
T+1 settlement reduces counterparty risk and capital requirements compared to longer settlement cycles by shortening the time between trade execution and final settlement. The US markets moved to T+1 in May 2024, following earlier moves by other markets including India and China. T+1 requires significant operational changes including earlier trade matching, confirmation, and allocation processes. Market participants must enhance technology, modify workflows, and coordinate with counterparties to meet compressed timelines. Benefits include reduced settlement risk, lower margin requirements, and faster access to securities and cash. Implementation requires coordination across trading, clearing, custody, and regulatory systems to ensure smooth operations and maintain market stability.
Example
US equity trades executed Monday settle Tuesday, requiring same-day trade confirmation