How long does it take for fidelity trade to settle?

While a trade order is executed almost instantly, the actual transfer of ownership for securities and funds between the buyer and seller takes time. This process, known as settlement, ensures the integrity and security of transactions within financial markets.

Understanding Trade Settlement

Trade settlement is the concluding step in a securities transaction, where ownership of securities is transferred to the buyer and the corresponding funds are transferred to the seller. This differs from the “trade date” (T), the day the order is executed. The “settlement date” is when the transaction officially finalizes.

The time between the trade date and settlement date is commonly expressed using “T+X” notation, where X represents the number of business days following the trade date. For example, a T+1 settlement means the transaction settles one business day after the trade date. This period allows for administrative processing and transfer of assets, ensuring all parties fulfill their obligations.

Typical Settlement Times for Various Assets

The standard settlement periods vary depending on the type of security traded. These periods are industry-wide and apply consistently across brokerage platforms, including Fidelity.

For stocks and Exchange Traded Funds (ETFs), the standard settlement period in the United States shifted to T+1, or one business day after the trade date, as of May 28, 2024. This means if you buy or sell shares on a Monday, the transaction will officially settle on Tuesday, assuming no market holidays.

Options contracts generally settle on a T+1 basis. Mutual funds typically settle on T+1 as well, though the exact timing can sometimes vary depending on the specific fund’s prospectus. Mutual fund orders are usually processed once per day after the market closes, based on the Net Asset Value (NAV) calculated at that time.

Many types of bonds, including government bonds and most corporate and municipal bonds, also settle on a T+1 basis. Fidelity’s platform adheres to these industry standards, and details regarding estimated settlement dates are typically available within trade confirmations or account activity sections.

Factors Affecting Settlement Speed

Several external factors can influence or extend the standard settlement periods.

Weekends and market holidays do not count as business days for settlement calculations. For instance, a stock trade executed on a Friday with a T+1 settlement will not settle until the following Monday, provided Monday is not a holiday. Any official market closures, whether scheduled holidays or unexpected events, will similarly extend the settlement timeline.

While the focus here is on U.S. markets, trades involving foreign exchanges or securities might have different settlement periods due to local market regulations. Fidelity’s systems are designed to process settlements efficiently within these established industry guidelines. Once a trade settles, the actual availability of funds for withdrawal to an external bank account may still depend on bank processing times, which are separate from brokerage settlement cycles.

Funds Availability After Settlement

After a trade settles, the funds or securities are transferred and become “settled cash” or “fully owned securities.” This settled cash is immediately available for new trades within your Fidelity brokerage account. For example, if you sell a stock and the trade settles, you can use those proceeds to purchase another security without delay.

However, if you wish to withdraw settled funds to an external bank account, additional time is usually required for the bank transfer. Electronic Funds Transfers (EFTs) from Fidelity to your bank typically take 1-3 business days after the funds are settled and the transfer is initiated. Fidelity’s platform generally distinguishes between “cash available to trade” and “cash available to withdraw.”

“Cash available to trade” might include funds from unsettled sales, allowing for immediate re-investment in some cases. Conversely, “cash available to withdraw” specifically refers to funds that have fully settled and are ready for transfer out of the brokerage account. It is important to utilize settled funds for new purchases to avoid potential trading violations, such as a “good faith violation,” which can occur if you buy a security and sell it before the initial purchase has been paid for with settled funds. Such violations can lead to temporary restrictions on your account.