Trades Are About to Settle a Day Sooner


The time period between when you buy or sell a security and when the trade is settled is about to shrink. Currently, the U.S. operates on a three-day settlement cycle. Effective Tuesday, September 5, 2017, the U.S. will switch to a two-day settlement cycle. The moniker is T+2, which stands for trade date plus two days. A trade executed on September 5, 2017, will be settled on September 7, 2017. Thereafter, executed orders to buy and sell will be settled on a two-day cycle.

This shortened cycle will apply to stocks, corporate bonds, municipal bonds, unit investment trusts and financial instruments composed of these security types. Most, but possibly not all, mutual funds will shift to a two-day settlement cycle on September 5. Exchange-traded funds and closed-end funds—which trade like stocks—will also make the shift to T+2. (The T2 Settlement website has a full list of the investment products moving to a two-day settlement.) The European Union, Hong Kong and South Korea have already moved to T+2. Canada, Mexico and Peru will join the U.S. in switching over on Tuesday.

The change is a big deal for the financial industry. Shortening the settlement cycle will significantly reduce the amount of capital that clearing firms (the entities who ensure trades are processed) are required to hold. The Depository Trust & Clearing Corporation (DTCC) estimates the change will reduce daily average capital requirements for its equity clearing fund by 25%, or $1.36 billion. The change will also give various financial firms and institutional investors more flexibility.

The T+2 switch will also have implications for individual investors. Continue Reading »

Let the AAII Journal Guide You to Better Investment Returns

AAII is a nonprofit association that provides you with member benefits, tools and services all designed to help increase your investment wealth. With membership, you’ll receive the monthly AAII Journal—our most popular benefit. Topics covered include financial planning, retirement issues, taxation, fund and stock selection, stock screening and a host of timely investment ideas and concepts that you’re certain to benefit from.

Forbes Magazine says, “The AAII Journal is a thoughtful mix of investment professionals’ views” and that “the $29 a year it costs to belong to AAII is a bargain.”

Free Guide—New Members are rushed a comprehensive guide that covers our popular library of Stock Screens in great detail.

More on

Highlights from this month’s AAII Journal

AAII Sentiment Survey

Pessimism rose by a cumulative 15.6 percentage points in August and is now at the top of its typical range. More about this week’s results.

This week’s results:
  • Bullish: 25.0%, down 3.1 points
  • Neutral: 35.1%, up 1.5 points
  • Bearish: 39.9%, up 1.6 points
Historical averages:
  • Bullish: 38.5%
  • Neutral: 31.0%
  • Bearish: 30.5%

Take the Sentiment Survey.

The Week Ahead

The U.S. financial markets will be closed on Monday in observance of Labor Day. Have a good, and hopefully dry, holiday weekend.

As noted above, the U.S. will switch to a two-day settlement cycle on Tuesday.

September, which starts tomorrow (Friday), has historically been the “worst” month of the year for the major indexes. Though the month’s average return is negative—The Stock Trader’s Almanac calculates the Dow and the S&P 500 as averaging declines of 0.8% and 0.5%, respectively, between 1950 and 2015—not all Septembers have experienced declines. Rather, the averages should simply be kept in mind if (and I’m not saying it will) the market hits a few bumps in the road as we head into fall.

Only two S&P 500 member companies are scheduled to report earnings: Hewlett Packard Enterprise Co. (HPE) on Tuesday and Kroger Co. (KR) on Friday.

The week’s first economic report will be July factor orders, released on Tuesday. Wednesday will feature July international trade, the ISM’s August non-manufacturing index and the Federal Reserve’s periodic Beige Book. The last economic report this week will be revised second-quarter productivity, released on Thursday.

Eight Federal Reserve officials will make public appearances: Governor Lael Brainard, Minneapolis president Neel Kashkari and Dallas president Robert Kaplan will speak on Tuesday; Cleveland president Loretta Mester, New York president William Dudley, Atlanta president Raphael Bostic and Kansas City president Esther George will speak on Thursday; and Philadelphia president Patrick Harker will speak on Friday.

Local Chapter Meetings

AAII Local Chapter Meetings offer you a variety of presentations from expert speakers who will give you their view on the world of investing. A bonus of attending a Chapter Meeting near you is the opportunity to meet other AAII members who share your interest and enthusiasm for investing. You can even share the Chapter experience with your family and friends by inviting them to attend Chapter Meetings with you! Upcoming Meetings »


Leave a Reply

Your email address will not be published. Required fields are marked *