T+1, T+2, T+3
What it is:
T+1, T+2 and T+3, as well as other "T+" numbers, refers to the number of days it takes to settle a financial transaction.
How it works/Example:
Funds settlement refers to the transfer of from buyer to seller and the transfer of title to an from seller to buyer. For most securities and trades, this occurs the same business day the trade occurs (this is called "T+0"), although not long ago it took one to three days (referred to as "T+3").
For example, when an investor sends an order to his or her and the trade is made with another broker/dealer or specialist, that trade information is sent to a clearinghouse such as the National Securities Clearing , which is a subsidiary of the Depository Trust & Clearing . This may settle in a day, or T+1. Similarly, a person who writes a check may see settlement in T+2 or T+0, depending on the nature of the transaction.
Why it matters:
T+ market risk by ensuring that trades are executed properly. Fast also increases investor confidence in the markets by ensuring that their trades are completed on time and that they won't lose their to bankrupt brokerage firms or intermediaries. It also requires participants to have the in their accounts as their trades are made (or arrange for before the trade is placed).is an important "back-office" function, and the faster it occurs, the more it reduces