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Question

Difficulty: EasySettlement Dates, Trade Confirmations, and Corporate Actions

On Monday, June 1, a retail investor executes a regular-way purchase of corporate stock through a broker-dealer. Assuming no intervening holiday, on which day will the trade settle?

  1. A
    Monday, June 1
  2. Tuesday, June 2Answer
  3. C
    Wednesday, June 3
  4. D
    Thursday, June 4

Answer

The trade will settle on Tuesday, June 2.
Under SEC and FINRA rules governing secondary market transactions, regular-way settlement for corporate stock occurs on the first business day following the trade date (T+1T+1). Because the transaction occurred on Monday, June 1, ownership transfer and payment completion take place on Tuesday, June 2.

Step-by-Step Solution

1
Identify the trade date and the applicable settlement rule.
The trade date is Monday, June 1. Under standard FINRA and SEC rules, regular-way settlement for equities occurs on T+1T+1 (Trade Date plus one business day).
Regular-way secondary market trades in corporate securities settle on the business day following the transaction.
2
Calculate the settlement date from the trade date.
Adding one business day to Monday, June 1 results in Tuesday, June 2.
Since there are no intervening business holidays, T+1T+1 is exactly one day after the trade date.

Key Concept

Regular-Way Settlement Cycle (T+1)
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Topics

Settlement Dates, Trade Confirmations, and Corporate Actions