Schwab Explains How Faster Securities Settlement Will Affect Investors

Zinger Key Points
  • SEC shortens securities settlement to T+1, effective May 28.
  • Schwab advises on T+1's impact on investment, trading, tax strategies.

After the Securities & Exchange Commission (SEC) announced upcoming rule changes to shorten the settlement period for most U.S. securities from two business days after the trade date (T+2) to one business day after the trade date (T+1), Charles Schwab Corporation SCHW has responded with a blog post.

Schwab’s blog post titled “7 Things To Know About T+1 Settlement,” notes that this adjustment, set to take effect on May 28, is a response to the advancements in technology and changing preferences among users.

The transaction date is the day on which a user buys or sells a stock. The settlement date is when that trade becomes official. Although the new cycle just changes the settlement date by one day, it could have tax implications, as investors will be assigned their stock one day earlier.

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Another point to consider is for investors intending to buy a stock to ensure ownership by a certain date, such as before a dividend payout. Now, investors have the flexibility to purchase shares closer to the dividend date, waiting until just one day before.

"For some investors, one-day settlement cycles may mean greater convenience. For others, T+1 may require closer attention to how shorter settlement times could affect one’s investment, trading, or tax decisions,” Schwab said in the blog post. “To learn more about how this transition could affect your individual situation, consider reaching out to a qualified advisor."

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