Regular-Way Stock Settlement: Let's Settle This!

When will a stock settle if purchased on July 2?

If a customer purchases a listed stock using regular-way settlement in a cash account on July 2, the stock will settle:

[A] July 3rd

[B] July 5th

[C] July 6th

[D] July 9th

Answer:

When buying a stock using regular-way settlement, the stock settles two business days after purchase. In this case, the stock bought on July 2 would settle on July 5.

Explanation: A stock settlement refers to the official transfer of securities from the seller's account to the buyer's account. In the U.S., the standard settlement period for stocks, or 'regular-way' settlement, is typically two business days after the trade execution (also known as T+2).

This concept is important when trading stocks, as it determines when you officially own the stock and when the seller gets their money. In this given situation, if a customer purchases a listed stock using regular-way settlement in a cash account on July 2, the stock will settle on July 5th.

It's important to note that only business days count, so typically weekends and holidays will not be counted. July 2 is on a Monday, so two business days later would be Wednesday, July 5th. Therefore, the answer is [B] July 5th.