11.4 Settlement Cycles (T+1) & Clearing
The modernization of US capital markets to T+1 settlement on May 28, 2024 unified settlement timing across equities, corporate bonds, municipal bonds, and options.
Key FINRA Exam Takeaways
- SEC Rule 15c6-1: Regular-way settlement is T+1 (1 business day after trade date) for equities, corporate bonds, and municipal bonds.
- US Treasuries and Options also settle in 1 business day (T+1).
- Cash Settlement: Same-day settlement (trade date = settlement date), requiring execution before 2:30 PM ET.
- DTCC (Depository Trust & Clearing Corporation): Central clearing and book-entry custodian for US securities.
- Good Delivery: Certificates must be endorsed, accompanied by stock power if unsigned, and in denominations of 100 shares or multiples that add up to 100.
| Security Category | Regular-Way Settlement | Payment Deadline (Reg T) |
|---|---|---|
| Common & Preferred Stocks | T + 1 Business Day | T + 2 Business Days |
| Corporate & Municipal Bonds | T + 1 Business Day | T + 2 Business Days |
| US Treasury Bills, Notes, Bonds | T + 1 Business Day | N/A (Exempt from Reg T) |
| Equity Options & Index Options | T + 1 Business Day | T + 2 Business Days |
| Cash Settlement (All Securities) | Same Day (T + 0) | Trade Date |
Knowledge Checkpoint • Section 11.4
Under current SEC settlement rules, if a corporate bond transaction takes place on Thursday, October 12, on which day will regular-way settlement occur?