Trade Date
The trade date is the day when a securities transaction is executed—when the buyer and seller agree to the terms and the order is filled, regardless of when settlement occurs.
Exam Tip
Trade date = when order executes. Settlement date = when ownership transfers. T+1 is current standard. Taxes based on TRADE date.
What is the Trade Date?
The trade date (T) is the actual day a securities transaction takes place. It's when your order to buy or sell is executed in the market. This is distinct from the settlement date, when ownership officially transfers and payment is exchanged.
Trade Date vs. Settlement Date
| Date | What Happens | When |
|---|---|---|
| Trade Date (T) | Order executes, price locked | Day you buy/sell |
| Settlement Date (T+1) | Ownership transfers, payment exchanged | 1 business day later |
T+1 Settlement (Current Standard)
| Security Type | Settlement |
|---|---|
| Stocks | T+1 |
| Corporate Bonds | T+1 |
| Municipal Bonds | T+1 |
| ETFs | T+1 |
| Mutual Funds | T+1 or T+2 |
| Government Securities | T+1 |
| Options | T+1 |
Note: T+1 became standard in May 2024, replacing T+2
Why the Distinction Matters
| Scenario | Trade Date Effect | Settlement Date Effect |
|---|---|---|
| Selling Stock | Gain/loss determined | Funds available |
| Buying Stock | Purchase price set | Must have funds |
| Dividends | Record date eligibility | N/A |
| Tax Year | Trade date determines tax year | N/A |
Example Timeline
| Day | Event |
|---|---|
| Monday (T) | You buy 100 shares of XYZ at $50 |
| Trade is executed, price is locked | |
| Tuesday (T+1) | Settlement occurs |
| You officially own shares | |
| $5,000 debited from account |
Trade Date and Taxes
Your trade date determines the tax year:
- Sell stock on December 31 → Trade date is December 31 → 2024 tax year
- Even if settlement is January 2 → Still a 2024 transaction
Trade Date and Dividends
| Date | Description |
|---|---|
| Declaration Date | Company announces dividend |
| Ex-Dividend Date | First day trading without dividend |
| Record Date | Must be shareholder of record |
| Payment Date | Dividend paid |
To receive dividend, you must buy BEFORE the ex-dividend date (trade date).
Common Mistakes
| Mistake | Correct Understanding |
|---|---|
| Thinking settlement = transaction date | Trade date is when transaction occurs |
| Waiting for settlement to know gain/loss | Price locked on trade date |
| Selling for December taxes on Dec 31 | Trade must execute Dec 31, not just placed |
Study This Term In
Related Terms
Settlement Date
SecuritiesThe settlement date is when a securities transaction is finalized, ownership officially transfers, and payment is exchanged—typically T+1 (one business day after the trade date) for most securities.
Ex-Dividend Date
SecuritiesThe ex-dividend date is the first day a stock trades without the right to receive the upcoming dividend, typically one business day before the record date. Buyers on or after this date will not receive the dividend.