The truth about US stock settlement times: How does the T+2 system affect your cash flow?

The biggest frustration when investing in stocks is often the inability to access your funds promptly after selling stocks. How long does the settlement process for US stocks actually take? And how does it differ from Taiwan stocks? These seemingly simple questions actually relate to your capital efficiency and trading strategies.

The Truth About US Stock Settlement Times: From T+3 to T+2 Evolution

The settlement system for US stocks has undergone an evolution. Before September 2017, US stocks used a “T+3” system, meaning you had to wait three business days after selling before you could withdraw your funds. This regulation significantly delayed cash flow at the time. It wasn’t until September 2017 that US exchanges adjusted the settlement period to “T+2,” reducing the waiting time by one day for investors.

Therefore, the current standard for US stock settlement is: The day you sell stocks is T day, then you wait two business days, and on the third day, you can officially withdraw your funds. For example, if you sell 100 shares of Apple on Monday, you will be able to transfer the proceeds to your bank account on Wednesday.

Taiwan Stock Settlement System: Parallel Old and New Systems Offering Choices

The situation in Taiwan is more complex. The traditional Taiwan stock settlement system also uses a “T+2” model, similar to the US. However, in May 2022, Taiwan’s Financial Supervisory Commission launched a groundbreaking “T+0” system, changing many investors’ trading experience.

The core feature of the “T+0” system is: Sell stocks on the same day and receive the money on the same day. But understanding the mechanism behind this is important: in reality, brokerages advance funds to you, effectively lending you money, and you need to pay interest on the borrowed amount (usually around 5%). This system is not automatically enabled; investors must actively apply to brokerages (such as Fubon Securities, Yuanta Securities, etc.).

Thus, Taiwan stock investors face a choice: either follow the traditional “T+2” without paying interest, or use “T+0” for quick withdrawals but pay interest costs.

Different Settlement Rules for Various US Account Types

The actual experience of US stock settlement largely depends on what type of account you hold.

Cash Accounts: Strict Restrictions

Cash accounts are entry-level options, requiring investors to use only their own funds to buy stocks. Under this account type, the T+2 settlement rule must be strictly followed—funds cannot be used for the next trade until settlement is complete. This means if you buy stocks with unsettled funds and then sell on the same day (T+0 operation), the system will record this as a violation.

A key point to note is that two such violations in a cash account will result in a 90-day account restriction, during which all trading is prohibited. For example, if your account has $100, and you place an order to buy a stock that suddenly rises to $120, causing insufficient funds, you must deposit $20 within five business days; otherwise, a 90-day restriction will be triggered.

To avoid such risks, you can either deposit sufficient funds before trading or upgrade to a margin account.

Margin Accounts: Flexible Advantages

The biggest advantage of margin accounts is breaking the T+2 restriction. As long as your total account assets exceed $25,000, you can perform unlimited intraday trading (T+0) without waiting for settlement.

These accounts also support short selling, margin buying, options trading, and other advanced strategies, offering a much wider range of trading options than cash accounts. The trade-off is a higher account opening threshold (usually over $2,000 initial capital) and paying interest on borrowed funds.

Possibility and Practical Differences of Same-Day Funds for US Stocks

Many investors wonder: since selling US stocks takes T+2 to access funds, can I buy US stocks and have the funds available on the same day?

The answer is yes. By depositing directly through a US stock broker, funds can arrive almost instantly, allowing you to trade on the same day if deposited before market close. However, if you use Taiwan’s sub-broker channels (acting as agents for US stock trading), the rules differ—usually, deposits must be completed before 8 PM to enable same-day trading.

Alternative to T+0: CFD Trading

For investors with insufficient funds to open margin accounts, but who want to enjoy T+0 flexibility under the constraints of US stock settlement times, Contract for Difference (CFD) trading offers a new approach.

Advantages of CFD trading include:

• Low minimum deposit, around $20 to trade a single stock
• T+0 system: deposit on the same day, trade on the same day, and withdraw on the same day
• Supports two-way trading (long or short) and high leverage (up to 200x)
• Wide range of trading assets, including stocks, stock indices, forex, gold, oil, and cryptocurrencies

CFD withdrawals are as efficient as deposits, many platforms charge no fees, making it attractive for small investors seeking high capital turnover.

Summary: Choose the Appropriate Settlement System Based on Your Goals

Whether it’s the T+2 system for US stocks or the newly introduced T+0 scheme for Taiwan stocks, each has its suitable scenarios. Long-term stable investors can accept the T+2 wait; frequent short-term traders might consider upgrading to margin accounts or exploring CFDs; small-scale investors with frequent trades may find CFD flexibility appealing. Understanding the essence of these systems allows you to make the best choice according to your trading style and capital size.