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For most stock trades, settlement occurs two business days after the day the order executes, or T+2 (trade date plus two days). For example, if you were to execute an order on Monday, it would typically settle on Wednesday. For some products, such as mutual funds, settlement occurs on a different timeline.

The two-day settlement date applies to most security transactions, including stocks, bonds, municipal securities, mutual funds traded through a brokerage firm, and limited partnerships that trade on an exchange. Government securities and stock options settle on the next business day following the trade.

The settlement date for a mutual fund trade is the date on which the transaction is considered to be finalized and closed. Money that a customer owes must be available in their account to cover the shares purchased by the trade settlement date.

While the stock market securities now adhere to T+1 cycle, the same transaction takes one day longer in case of mutual fund units. Earlier it used to take a minimum of three days, but with effect from February 1, the settlement cycle was cut down by one day. This means now it will take T+2 for the transaction to close.

What Is a Settlement Date? The settlement date is the date when a trade is final, and the buyer must make payment to the seller while the seller delivers the assets to the buyer. The settlement date for stocks and bonds is usually two business days after the execution date (T+2).

A transaction date represents the date on which a transaction occurs whereas the settlement date is the day on which the transaction is finalised, that is, the ownership of the security is transferred to the buyer.

Standard settlement periods include T+1 (one business day after the trade), T+2, or T+3, indicating the number of business days after the trade date. The settlement date affects buyers' and sellers' cash flows and risk exposure. Buyers must have funds to settle the transaction, while sellers rely on timely payment.