What is happening?

The Securities and Exchange Commission adopted an amendment to shorten trade settlement by one business day. Currently, the standard settlement cycle for these transactions is three business days, known as T+3. The amended rule shortens the settlement cycle to two business days, T+2.

Effective September 5, 2017, trades of impacted securities will move from T+3 settlement to T+2. Stock trades executed before September 5th will remain subject to T+3 settlement. See schedule below for trade settlement timing leading up to and after the change occurs.


Why is this happening?

The change “is designed to enhance efficiency, reduce risk, and ensure a coordinated and expeditious transition by market participants to a shortened standard settlement cycle”.1

What securities are impacted?

Any security that currently settles T+3 is in-­scope to settle T+2 and includes, but is not limited to:

  • Common stock
  • Corporate bonds
  • Municipal bonds
  • Unit investment trusts
  • Exchange Traded Funds (ETFs)
  • American Depositary Receipts (ADRs)
  • Exercises and assignments of options contracts
  • Mutual funds

Click here for a more detailed list of impacted securities developed by the industry T+2 Product Scope Working Group.

What does it mean to the client?

From the perspective of the seller, the change will result in receiving settled funds one business day sooner, allowing the account holder to reinvest those funds a day earlier.

From the perspective of the buyer, the change requires settled funds to be in their account one trading day sooner. If there aren’t sufficient funds (or available margin borrowing value in margin accounts) at the time of settlement, the account may be subject to a settlement violation.

Settled Funds, Settlement Violations, and Other Considerations

Moving from T+3 to T+2 settlement requires fully settled funds in the buyer’s account one day sooner. So what are settled funds?

Settled funds include:

  • Incoming cash like a check deposit or wire
  • Settled sale proceeds of fully paid-­for securities
  • Available margin borrowing value (for margin accounts).

Settlement violations can occur when new purchases are not properly covered by settled funds or sales covered by delivery of shares. Settlement violations can result in trade restrictions of 90 days or more.

Details on common settlement violations
Settlement: Cash Accounts vs. Margin Accounts
Settlement: Dividend Distributions

Explore Frequently Asked Questions

Is this a Schwab-­specific action or an industry-­wide action?
Who is bringing about this change and why?
I have an IRA or other type of retirement account. How does the change to T+2 impact me?
How will this impact ex-dividend dates?
How will the change in trade settlement impact order status?
How does the pending T+2 change impact options exercises?
When placing a trade, I sometimes specify the lots I would like to sell. How might T+2 settlement impact me?
I send in checks via mail from time-to-time to pay for executed trades. How does the T+2 change impact me?

We're here to help

If you have questions about the T+2 settlement change, please call our customer service team at
800-435-4000. For optionsXpress clients, call 888-280-8020.