From Execution to Settlement: The T+1 Trade Lifecycle and Its Cutoffs
Updated October 2026, after T+1 took effect. First published January 2024.
Since May 28, 2024, most broker-dealer securities trades in the U.S. settle one business day after trade date. The SEC's amended Rule 15c6-1(a) bars a broker-dealer from entering a contract that settles later than "the first business day after the date of the contract" unless the parties expressly agree otherwise when they trade. The SEC set T+3 in 1993 and T+2 in 2017. The move to T+1 took out the day that used to absorb trade-date mistakes.
This post follows one institutional equity trade from execution to settlement and gives the cutoff at each step. An investment adviser places a block order, an executing broker fills it, and the shares settle at DTC between the broker and each client's custodian. Retail trades take a shorter path, because the broker usually carries the customer's account and there's nobody to allocate to or affirm with.
What T+1 Covers
Rule 15c6-1(a) applies to broker-dealer trades in every security except exempted securities, government securities, municipal securities, commercial paper, bankers' acceptances, and commercial bills. In practice that means equities, corporate bonds, ETFs, ADRs, unit investment trusts, and listed limited partnership interests. Paragraph (b) leaves out unlisted limited partnership interests and security-based swaps. Paragraph (c) gives firm commitment offerings priced after 4:30 p.m. ET until T+2.
The parties can still agree to a longer cycle at the time of the trade. SEC staff note in their March 2024 T+1 FAQ that the Commission has described that override as meant for "unusual" or "limited" circumstances, and that a trade with extended settlement is still subject to the same-day affirmation rule.
The Timeline at a Glance
All times are Eastern. T is trade date; T+1 is settlement date.
| Step | Who acts | Deadline under T+1 | Under T+2 it was |
|---|---|---|---|
| Execution | Executing broker | During the session on T | Same |
| Allocation | Investment adviser | 7:00 p.m. on T (industry recommendation) | — |
| Confirmation and affirmation | Broker, then adviser or custodian | 9:00 p.m. on T (DTC cutoff) | 11:30 a.m. on T+1 |
| Authorizations and exemptions (ID, ID Net, CNS) | Custodian and broker at DTC | 10:30 p.m. on T | 6:30 p.m. on T+1 |
| DTC night cycle | DTC | Starts about 11:30 p.m. on T; output about 1:30 a.m. on T+1 | 8:30 p.m. to 10:30 p.m. on T+1 |
| Delivery cutoff, valued transactions | DTC participants | 3:20 p.m. on T+1 | 3:20 p.m. on T+2 |
| Close-of-business settlement | DTC | 3:45 p.m. on T+1 | 3:45 p.m. on T+2 |
The DTC times come from DTCC's June 2023 overview of T+1 timing changes, which listed them as target times, and from the DTC Settlement Service Guide for the night cycle. Check DTC's current service guides before you hard-code any of them into a procedure.
1. Execution
The adviser sends one block order for several client accounts. The broker works it during the session, often in many fills at different prices. One block produces two kinds of settlement. The street side, the broker against whoever took the other side of each fill, goes from the marketplace to NSCC and nets in Continuous Net Settlement (CNS). NSCC's trade capture system assigns the settlement date from codes the marketplaces send, and NSCC updated those rules for T+1. The institutional side, the broker against each client's custodian, settles at DTC once the trade is affirmed.
2. Allocation
The adviser tells the broker how to split the block: how many shares go to each client account. The industry's T+1 report, which the SEC cites in its adopting release, recommends that allocations be complete by 7:00 p.m. ET on trade date. That leaves two hours for confirmation and affirmation.
If your clients include managers in Europe or Asia, allocation is the step to watch. Commenters told the SEC that for advisers several hours ahead of the U.S., the new cutoffs would fall "late into their overnight." Another commenter said same-day affirmation would be hard even inside U.S. time zones for trades at or near the close.
3. Confirmation
For each allocated account, the broker sends an institutional confirmation with the trade details. The confirmation often goes through a central matching service such as DTCC's CTM, which matches the broker's trade details against the adviser's allocation.
This is a different document from the customer confirmation under SEC Rule 10b-10. That rule requires the broker to "give or send" a written confirmation at or before completion of the transaction. The SEC kept the rule as it was for T+1. It noted that the broker has to send the confirmation by then, and the customer doesn't have to receive it before settlement.
4. Affirmation
The adviser, or the custodian acting for it, affirms that the confirmation is right. Affirmed trades reach DTC for settlement automatically if they're affirmed by 9:00 p.m. ET on trade date. Under T+2 the cutoff was 11:30 a.m. the next morning.
New Rule 15c6-2 puts the obligation on the broker-dealer. Any broker-dealer that takes part in the allocation, confirmation, or affirmation process needs either written agreements with the other parties or written policies and procedures built to finish all three "as soon as technologically practicable and no later than the end of the day on trade date." The choice between the two is covered in Rule 15c6-2 in Practice.
Affirmation rates rose sharply. The SEC's release cites about 68% of trades affirmed on trade date in 2021. DTCC reported 73% affirmed by the 9:00 p.m. cutoff in January 2024 and nearly 95% after go-live. Its September 2024 after-action report broke the July 31 figures down: prime brokers at 98%, investment managers using central matching at 96%, and custodians or managers affirming their own trades at 88%.
A trade that misses 9:00 p.m. can still settle on time, but it costs more. The delivering party has to enter a night delivery order by 11:30 p.m. ET on trade date or a day delivery order on settlement day. DTCC calls both "more costly and operationally intensive" than affirming on time. SEC staff also said that hitting 90% doesn't satisfy Rule 15c6-2 by itself; the rule applies trade by trade.
5. Settlement Instructions and Authorization
The adviser tells the custodian what's coming, and the confirmation has to carry the client's standing settlement instructions (SSIs) for the right custodian account. An SSI error found on the morning after trade date used to leave a day to fix it. Now it's found on settlement day. Standing Settlement Instructions Under T+1 covers where those instructions live and how they go wrong.
Before the night cycle, the custodian authorizes the affirmed trades at DTC and sets any exemptions. DTCC's timing table moved that cutoff from 6:30 p.m. on the day before settlement to 10:30 p.m. on trade date.
One more step applies when the custodian is another broker-dealer and the trade is in a cash account at the executing broker. Before delivering, the executing broker relies on a Letter of Free Funds under Regulation T 220.8(c) to avoid a 90-day freeze on the account. Freefunds Verified Direct (FVD) sends those requests and tracks the responses inside the T+1 window.
6. The DTC Night Cycle
At about 11:30 p.m. on the business day before settlement, which is now trade date, DTC runs its Night Batch Process. It checks each participant's positions, transaction priorities, and risk controls, then picks the processing order that settles the most transactions. DTCC targeted the output for about 1:30 a.m. on settlement day. Firms use that output to plan stock loan returns and customer segregation for the morning.
Securities lending moved with it. The industry set 11:59 p.m. ET on trade date as the "leading practice" cutoff for recalls, to give lenders and their agents time to issue recalls and get more loaned shares back on T+1. The legal recall time is still whatever the lending agreement says.
7. Settlement Day
On T+1, DTC's day cycle takes what the night cycle couldn't settle. The settlement-day cutoffs didn't move: 3:20 p.m. ET for valued deliveries, 6:15 p.m. for free deliveries, and 3:45 p.m. for close-of-business settlement. A delivery that misses the day becomes a fail.
8. After Settlement: The Clocks a Fail Starts
- If you have a fail to deliver at a clearing agency from a short sale, you have to close it out by the start of regular trading hours on the settlement day after settlement date. Under T+1 that's T+2. Long sales and bona fide market making get until the third settlement day after settlement date, which is T+4 (Regulation SHO Rule 204). Regulation SHO Rule 204 Under T+1 has the details.
- For a customer's purchase in a cash account, Regulation T's payment period is the standard settlement cycle plus two business days (12 CFR 220.2). Under T+1 that's T+3.
- Registered investment advisers have to keep each confirmation they receive and each allocation and affirmation they send or receive, with a date and time stamp on every allocation and affirmation (Advisers Act Rule 204-2(a)(7)(iii)).
Corporate actions shifted too. DTCC noted that under T+1 the ex-date moved from one business day before the record date to the record date itself.
Where the Lifecycle Breaks Now
The timeline above has almost no slack between 7:00 p.m. and 11:30 p.m. We'd watch two numbers: the share of allocations received by 7:00 p.m. and the share of affirmations done by 9:00 p.m., each broken out by counterparty. A firm that complies with Rule 15c6-2 through policies and procedures already has to measure, monitor, and document those rates under paragraph (b)(5), so the data should exist. The SEC's release says procedures should also address a counterparty that misses targets again and again. DTCC's segment figures show where to look first. In July 2024, custodians and managers that affirm their own trades ran eight points behind those using central matching.
This post is for informational purposes only and does not constitute legal advice. For guidance on specific regulatory obligations, consult your counsel or compliance advisor.