WASHINGTON, August 30, 2017 – Where did the summer go? The older we get, the faster the warmer weather seems to come and go, and with it that brief respite of family time and general freedom, at least for most of us. Many of the country’s kids will head back to school after Labor Day, adhering to longtime tradition, although increasing numbers of students at all levels are now hitting the books (more or less) as early as mid-August.
For professional traders and “home gamers,” as Jim Cramer calls home office traders and investors like this writer, all Labor Day means, functionally speaking, is that Monday is not a trading day since it’s a Federal holiday; which, in turn, means we have to adjust money inflows and outflows accordingly on business days that flank the holiday, namely (for this holiday at least), Friday, September 1, 2017 and Tuesday, September 5, 2017.
But there’s also another functional change going into effect for investors on September 5. It’s a little change, to be sure. But for those who need to move money quickly, it’s an important one, so we’ll note it before we get to the trading hours part of today’s column.
SEC Settlement Day change
Ever since I spent time in the brokerage business back in the late Carter and early Reagan years, settlement day for stock trades – sometimes known in the trade as “regular way settlement” – occurred 3 business days after the trade was made, which is known in the biz as “T+3.” The term was, and is, analogous to the way a deposit to a bank “settles” in a customer’s account.
In my own bank currently, if I deposit, say, a $1,000 check or less into my checking account, it “settles” on the next business day, meaning that those funds are available for my use the business day after I deposit them.
If, however, I deposit a check for $10,000 in that same account, the bank allows $1,000 of that sum to settle on the next business day as usual. But the remaining $9,000, while showing up the next day in my account, isn’t available for my use for 5 more business days. In other words, the bank puts a 5-day hold on the remaining funds, obviously to cover its own derrière in the event I deposited a rubber check.
Practically speaking, since I’m a longstanding…