T+1, T+2, T+3

T+1, T+2, T+3

T+1, 2, 3 etc refers to the length of times it takes a transaction (T) to settle in business days. In other words, if a transaction is executed on a Monday and settlement is T+2, the trade will settle on Wednesday if there are no holidays on Tuesday or Wednesday. If there are, those days will not count so the trade will settle two business days after the trade. Settlement is when the two sides of the trade exchange whatever it is they are settling (cash, shares, bonds, derivatives, currencies etc). Actual settlement time varies between markets. Knowing the settlement modalities and understanding settlement risk are both critical for banks, traders and investors.

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