In the world of online stock brokerage accounts, it takes just a few seconds to buy or sell shares of stock. Yet the stock market still follows some rules from the days when investors would bring checks or shares of stock to the broker to complete buy or sell orders. A broker follows rules set by the Securities and Exchange Commission concerning when the money from a sold stock will be available in your brokerage account.
When you sell shares of stock through a broker, there are two important dates -- the trade date and the settlement date. The trade date is the day your order to sell shares is completed through the broker and the stock exchange. In most cases the trade date is the day you ask a broker to sell your shares -- either directly or through an online account system. The settlement date is the day on which the trade becomes official and is the day when the broker must have the money available from your stock sale.
U.S. financial markets use what is called T+3 settlement. This means a stock trade officially settles three business days after the trade date. If the shares you sold were in the form of paper certificates you would have until the third day after the trade to deliver the shares to your broker. The buyer of the shares also has the three days to deliver the payment for the shares to her broker. Although in most circumstances stock trades happen almost instantaneously and the funds to buy the shares are readily available, your broker must abide by the T+3 rule.
Day of Funds Availability
To determine on which day the money from your stock sale will be available, the three-day count starts on the day after the trade date. Only business days or days the stock market is open count toward the three days. For example, if you sold the shares on a Friday -- the trade date -- the money from the sale should be available in your brokerage account on Wednesday. If the Monday was a holiday, then the settlement date would be on Thursday.
It is important to remember that the day you place the order to sell and receive a sale price confirmation -- the trade date -- is the official date of sale for the stock shares. The three-day settlement period exists only to allow all parties involved in the trade to fulfill their obligations. Once a trade is official, you cannot go to the broker and "undo" the trade. If you want to get the money from your stock sale as soon as possible, you should check with the broker about withdrawal options once a trade has settled and the money is available in your account.
Tim Plaehn has been writing financial, investment and trading articles and blogs since 2007. His work has appeared online at Seeking Alpha, Marketwatch.com and various other websites. Plaehn has a bachelor's degree in mathematics from the U.S. Air Force Academy.