How long does it really take for stocks to be credited? A complete analysis of the Taiwan and US stock settlement systems

When investing in stocks, many novice investors often worry about one question: after selling stocks, how long does it take for the funds to be available? This seemingly simple question actually involves different settlement systems across various markets. The rules for Taiwan stocks and U.S. stocks differ greatly, directly affecting your fund liquidity efficiency.

U.S. Stock Settlement System: From T+3 to T+2

The U.S. stock settlement system has undergone adjustments. Previously, it adopted a “T+3” system, meaning investors had to wait three business days after a trade to access the funds. In September 2017, the U.S. market shortened the settlement cycle to “T+2,” meaning funds become available two business days after selling stocks.

The reason behind this reform was to improve market efficiency. Under T+2, if you sell stocks on Monday, the funds will be available on Wednesday. Although this is an improvement, investors seeking quick capital turnover still face limitations.

Cash Account vs Margin Account: Two Different Paths for U.S. Stock Trading

When opening a U.S. stock account, you need to choose the account type, which directly determines your trading flexibility and fund availability.

Trading Restrictions for Cash Accounts

Cash accounts require investors to complete the settlement (T+2) before making the next trade. If you use unsettled funds to buy stocks and then sell those stocks, the system will consider it a violation.

A key point is that violations can lead to a “90-day account restriction.” For example, if your account has $100 cash, and you place an order to buy a stock that suddenly surges to $120, exceeding your available funds, the purchase cannot be fully settled. You must deposit an additional $20 within five business days to cover the shortfall before selling those stocks; otherwise, you face a 90-day trading ban.

To avoid this situation, you can either deposit sufficient funds in advance or open a margin account.

Flexibility of Margin Accounts

Margin accounts are suitable for investors with ample funds. When your total assets exceed $25,000, you gain unlimited day-trading privileges, completely freeing yourself from the T+2 restrictions.

These accounts support short selling, borrowing funds from brokers for investments, and more advanced operations. The trading instruments are also broader, including stocks, ETFs, options, etc. However, opening a margin account requires a higher minimum deposit, usually over $2,000.

Taiwan Stock Settlement System: Upgrading from T+2 to T+0

Originally, Taiwan stocks used a “T+2” system, meaning investors had to wait two business days after selling stocks to see the funds credited. For example, Xiao Ming sells stocks on Monday, but the money only arrives on Wednesday, causing obvious cash flow issues.

To improve this, Taiwan’s Financial Supervisory Commission launched a “T+0” system in May 2022. This innovation allows investors to sell stocks and have the funds credited on the same day.

However, the T+0 system operates by borrowing money from the broker. The broker advances the funds that would normally arrive after two days, and investors must pay corresponding financing interest, usually around 5%. This interest cost is borne by the investor.

To use the T+0 system, investors must actively apply to their broker, and not all brokers offer this service. Interested investors should consult their financial institution at account opening.

Actual Situation of Same-Day Funds Deposit in U.S. Stocks

Compared to the T+2 restriction on withdrawals, depositing funds (adding money to the trading account) is much faster. Generally, funds deposited from the bank on the same day can be used for U.S. stock trading on the same day.

However, this also depends on your trading method. Depositing directly through a U.S. broker account is almost real-time. If you use a Taiwanese broker’s cross-border agency service to buy U.S. stocks, you must follow each broker’s rules, typically requiring deposits before 8 PM on the same day to trade on that day.

Actual Impact of Stock Settlement Time

The length of stock settlement time directly affects investors’ fund efficiency. If frequent market entry and exit are needed, the T+2 waiting period limits trading frequency. Although the T+0 system solves this issue, it incurs interest costs.

Investors should evaluate their trading frequency and capital scale to choose the most suitable account type and trading system. Frequent traders may consider margin trading or T+0 options but should carefully calculate costs. Infrequent traders can use cash accounts to avoid extra expenses.

Regardless of the chosen method, understanding stock settlement systems and fund availability rules is essential for becoming a savvy investor.