Move to T+1 settlement cycle in Canada, starting May 27, 2024

In May 2024, Canadian and U.S. securities markets are moving to a standard trade settlement cycle of T+1 (short for "trade date plus one business day") for investments that currently settle on a T+2 basis (trade date plus two business days):

• Canadian securities markets will move to T+1 on May 27, 2024 
• U.S. securities markets will move to T+1 on May 28, 2024 (one day later, due to U.S. Memorial Day on May 27)

This is part of a global initiative that's been underway for a number of years to transition to a shorter settlement cycle. Moving to a T+1 settlement cycle will primarily have benefits behind the scenes. For more information, go to CDS (Canada Depository for Securities Ltd.) migration to T+1.

No. There are no changes to the settlement process, other than for assets currently on a T+2 basis the funds will settle one day sooner.

The shorter settlement cycle means funds will become available sooner—for example, in-cash transfers from another broker, or funds that are available to withdraw after you complete a trade.

For self-directed customers with a Margin account who are buying a security and borrowing funds, interest charges on borrowed amounts will start one business day sooner.

This is a high-level list of assets that will move to a T+1 settlement date. This list is not exhaustive. For more information, go to the CCMA (Canadian Capital Markets Association) T+1 page for the latest asset list.

• Bonds – corporate bonds, government bonds (except for savings bonds), convertible bonds
• Fixed-income funds – equity ETFs
• Preferred shares – preferred and convertible preferred
• Equity – common shares, equity funds, rights, warrants, units

As is the case today, investments settling on a "special-terms" basis aren't affected by the move to T+1. In addition, here is a high-level list of assets that are not affected by T+1. This list is not exhaustive. For more information, go to the CCMA (Canadian Capital Markets Association) T+1 page for the latest asset list.

• Money market funds
• Cashable and non-cashable GICs
• Physical commodities, such as precious metals

Trade settlement happens on all trades you make. While the money is taken and withdrawn from your account the moment your trade is executed, this settlement process continues behind the scenes. 

These are the stages in a trade settlement:

1. Trade execution date (trade or “T” date) – the date when the trade is executed.
2. Settlement process – the process by which:
   
• The buyer gives the agreed amount of money to the seller
• The seller transfers ownership of the security to the buyer through intermediaries, according to the terms of the agreement
• The intermediaries co-ordinate the transaction to make sure the payment is made and the security is transferred to the buyer
  
3. Settlement date – the date when the buyer must pay for the security and the seller must deliver it. By the new T+1 rules, for all securities that settled on a T+2 basis, the settlement date is now one business day after the trade (T) date.

Note: The information in this blog is for information purposes only and should not be used or construed as financial, investment, or tax advice by any individual. Information obtained from third parties is believed to be reliable, but no representations or warranty, expressed or implied is made by Questrade, Inc., its affiliates or any other person to its accuracy.