TD bank is one day now. I left Bac during the crash and they were still at three days. Not sure if they still are.
I was a financial DBA manager before I retired and I saw a lot of these processes work each day. The answer to your question centers on the original stock hand processing methods and bank cash transfers. When they automated these processes on Wall Street they kept the same methods to appease the bankers and brokers. The hold up in the settlement process is each hand shake in between the buyer and seller is still processed using large transaction âbatchesâ in the wee hours of each morning (mostly on big IBM mainframes). So it takes three days for each side to gain each sides acknowledgement. Because this is a tug of war with money no one is willing to give in to build a new method; which would be easy to do to make it faster. For example if you just sold a stock for a million the one who has to come up with the million wants those dollars in their account for as long as possible before turning it over to you. It is similar to you cashing an out of town check at your local bank. The one who must provide the money from out of town is slow to give it up to you.
Since settlement is something I don't really understand in the context of trading, would anyone care and try explain it to me? What is its purported utility?
Because unless you have a margin account, you have to wait for settlement before you can re-use the capital. But also because when you're trying to move funds between accounts, settlement interferes with funds movement. Also, if you hedge the movement in one account with another account, and one account gets low or insufficient, cash transfer matters. Something like this should be automated and instantaneous (or close to it), but we've still got crazy settlement times and hassles in moving money around.
Itâs the process of transferring ownership of the stock between the buyer and the seller. The basics are explained here: http://en.wikipedia.org/wiki/Stock
Garchbrooks, when the last physical stock and bond certificates are turn in to brokers and everyone accepts electronic signatures, maybe then we will get rid of this process. However, there are still millions of people who do not trust the system and will not buy stocks unless they are provided physical paper as proof of the transaction (even if it stays with the broker).
Why would it be good to interfere with cash movement? As long as figures square out, why should be there a time restraint at all?