Settlement is one business day after the trade. Rule 15c6-1(a) prohibits a broker-dealer from entering into a contract for the purchase or sale of a security that provides for payment of funds and delivery of securities later than the first business day after the date of the contract, with a compliance date of 28 May 2024. Sell shares on Monday under that cycle and the transaction settles on Tuesday. The condition that stretches the clock is the word "business": a Friday trade settles on Monday, and an exchange holiday pushes the date out by another day.

Rule 15c6-1 counts business days, not calendar days

The cycle used to be two days. The settlement cycle for most securities transactions was two business days from 2017, so a sale on Monday settled on Wednesday, and the amendments the SEC adopted on 15 February 2023 cut that to one business day for transactions occurring on or after 28 May 2024.

The scope is broad. The T+1 cycle applies to the same securities transactions the T+2 cycle covered, including stocks, bonds, municipal securities, exchange-traded funds, certain mutual funds, and limited partnerships that trade on an exchange.

Behind the retail account, the compression landed on the paperwork. Rule 15c6-2 requires allocations, confirmations and affirmations to be completed as soon as technologically practicable and no later than the end of the day on trade date. Two other consequences reach the customer directly: a securities certificate has to reach the broker-dealer earlier or by different means, and the cycle affects certain provisions of a margin agreement, which is part of how a margin account is funded.

Example: a Friday sale and Monday's cash

Here is the mechanism in an example; it is not a strategy. An account sells 100 shares at $40.00 on Friday 11 September 2026. Gross proceeds are 100 times $40.00, or $4,000.

The first business day after Friday 11 September 2026 is Monday 14 September 2026, because Saturday and Sunday are not business days. That Monday is the settlement date, the official transfer of the securities to the buyer's account and the cash to the seller's account. The trade date is Friday. The two are three calendar days and one business day apart, which is the gap that makes settlement worth counting at all: nothing about the position changes over the weekend, but the cash is not yet the account's to send anywhere.

Buy $4,000 of a different stock on that same Friday and the purchase itself is permitted, because Regulation T authorizes a broker-dealer to buy a security in a cash account when the firm accepts in good faith the customer's agreement to promptly make full cash payment for the security before selling it. The purchase is paid for by proceeds that settle on Monday. Sell that second position before Monday without depositing $4,000, and the account has paid for nothing.

The unsettled window is where a cash account gets frozen

That last move has a name. If an investor buys and sells a security before paying for it, the investor is freeriding, which is not permitted under Regulation T and can require the investor's broker to freeze the account for 90 days.

The freeze is a change of terms, not a closure. During the 90-day period an investor can still purchase securities in the cash account, but has to fully pay for any purchase on the date of the trade, which removes the unsettled-proceeds window entirely. The way to avoid it is to fully pay for the securities by the settlement date with funds that do not come from the sale of those securities.

The SEC's worked case is the compact version: sell settled ABC stock on Monday, buy XYZ the same day with the unsettled proceeds, and the ABC sale settles Tuesday, one business day after the sale, so selling XYZ on Monday afternoon without adding cash is freeriding. Sell XYZ on Friday instead and the ABC proceeds have long since settled, so the purchase was fully paid for before the sale.

One business day is a short window, and it is the window every cash-account trading decision runs inside. Three questions fall out of it. Are the funds paying for this purchase settled, or are they proceeds still in transit? If they are in transit, on which business day do they land? And does the plan for this position require selling it before that date? A yes to the third question, with a no to the first, is the free-riding pattern the bulletin describes, and it costs 90 days of trade-date payment. The same day count decides when proceeds can be withdrawn, when they can be redeployed, and when a gross result becomes money you actually hold.

Source references

Primary sources used for this guide. Follow the links for the original scope, definitions and conditions.