A Comprehensive Analysis of Stock Settlement Speed: Complete Understanding of the Differences Between US and Taiwan Stock Cash Transfers

U.S. Stock Settlement System: T+2 Standard Process

The U.S. stock market adopts the “T+2” settlement system, meaning funds are available two business days after the trade. Prior to September 2017, this rule was “T+3,” but it was adjusted to the current standard due to modernization efforts in the U.S. financial industry. This also means that if you sell stocks today, you must wait until the day after tomorrow at the earliest to receive cash for withdrawal or reinvestment.

Dual Track of Taiwan Stock Settlement System

Taiwan’s stock market has always implemented the “T+2” settlement method, where funds are available two business days after the transaction date (T). However, in May 2022, the Taiwan Securities Exchange launched an innovative “T+0” system, allowing investors to access funds immediately on the transaction day.

The operation logic of this T+0 mechanism is: brokerages advance funds to investors, effectively borrowing money from the broker. Investors need to pay approximately 5% interest cost. To activate this service, investors must proactively apply to the broker. Fubon Securities, Yuanta Securities, and other institutions have already opened this service.

Differences in Trading Accounts for U.S. Stocks

Restrictions and Risks of Cash Accounts

Cash accounts require investors to complete the T+2 settlement before they can proceed with the next transaction. Violating this rule will trigger account restrictions.

The following actions will directly lead to a 90-day account freeze:

(1) Executing same-day offset transactions (T+0 trading), i.e., buying and selling stocks on the same day, using unsettled funds for subsequent trades

(2) Selling stocks again before the settlement date and payment completion

Example: An account has $100 in cash, and a market order is placed to buy a stock that settles at $120 due to price fluctuations, exceeding the account cash. The investor must deposit an additional $20 within five business days; otherwise, they cannot sell the stock, ultimately facing a 90-day restriction.

Ways to avoid restrictions:

(1) Deposit sufficient funds before trading to ensure each transaction is supported by cash

(2) Open a margin account for more flexible trading

Flexibility of Margin Accounts

Margin accounts are suitable for advanced traders. When total assets reach $25,000, investors can break through the T+2 restriction and perform unlimited intraday buying and selling.

These accounts support short selling, borrowing from brokerages, trading options, and other advanced products, offering much higher flexibility than cash accounts. However, the account opening threshold is higher (usually starting from $2,000), making it more suitable for investors with larger trading volumes.

Comparison of the two account types:

Speed of Funds Deposit for U.S. Stocks

Unlike withdrawals, the deposit speed for U.S. stocks is quite fast. If funds are deposited into the bank on the same day, they can be used in the account for trading on the same day.

However, the specific settlement time depends on the trading channel. Opening an account directly with a U.S. stock broker allows almost instant fund arrival. Using a Taiwan stock broker to place a cross-market order to buy U.S. stocks requires following each broker’s regulations, typically needing deposits before 8 PM to trade U.S. stocks on the same day.

Alternative to Intraday Trading: Contracts for Difference (CFD)

For investors who want low-threshold participation in U.S. stock trading and enjoy T+0 benefits, CFDs are another option.

CFD trading involves contracts based on price movements; investors do not need to purchase the actual assets, only trade the price difference. This mode supports two-way trading (long and short), high leverage, and covers stocks, stock indices, forex, gold, crude oil, cryptocurrencies, and more. For example, with 10x leverage, trading one share of Tesla costs only a few dozen dollars, far less than the cost of buying the actual stock.

CFD platforms also implement T+0 for deposits and withdrawals. Most platforms charge no fees for withdrawals, enabling higher capital turnover and making it very convenient for traders needing quick fund adjustments.

Key Summary

Choosing the appropriate settlement system and account type is crucial for optimizing capital efficiency. Taiwan stock investors can leverage the T+0 system to respond to short-term opportunities, while U.S. stock investors should select between cash and margin accounts based on their capital size and trading frequency. For ultimate freedom and low costs, derivatives like CFDs are also worth exploring.