As electronic processing and systems integration has improved over the years, settlement periods have shortened. Investors need to be aware of the applicable rules, since cash flow and the possible application of interest charges are affected.
In Canada, commencing Monday, May 27, 2024, most securities will settle one business day after a trade (changing from the current two business days), known as T+1. The same change takes effect in the U.S. commencing Tuesday, May 28, 2024.
The change means that payment for purchases, and the availability (interest-free) of funds from sales, occurs the following business day, one business day sooner than previously. It also aligns affected securities with those already on T+1 settlement, such as options and government securities. For investors using margin accounts, a failure to fund resulting in a margin call will now occur T+3, one day previously, reflecting the changed settlement period.
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