How long does it take to execute a stock trade in india

Stock settlement violations occur when new trades to buy are not properly covered by settled funds. Although settlement violations generally occur in cash accounts, they can also occur in margin accounts, particularly when trading non-marginable securities. 

The main types of violation are good faith, freeriding, and liquidation

Good faith violations occur when you buy a stock with unsettled funds, and then sell it before the funds you bought it with have settled.

  • The situation: 
    • Ms. Jones sells 100 shares of XYZ stock for $2,000, the proceeds from which will settle two business days later (T+2). Ms. Jones immediately invests $1,000 of the unsettled proceeds in UVW stock.
    • The next day, Ms. Jones sells her UVW stock for $1,500—a day before the XYZ trade settles.
  • The violation: Ms. Jones bought UVW stock using unsettled proceeds from her sale of XYZ stock, and then sold the UVW stock before the XYZ proceeds settled on T+2.
  • The consequence:
    • The first instance of a good-faith violation in an account generally leads to a notification, but no restrictions. (Note that Schwab may at its discretion impose permanent restrictions or account closures.)
    • The second through fourth violations in a rolling 12-month period can lead to a 90-day settled-cash restriction, meaning trading is limited to the amount of settled funds available in your account. At Schwab, clients can use a one-time exception—i.e., once in the life of the account—to remove such a restriction.
    • The fifth violation of any kind generally results in a permanent settled-cash restriction.

Freeriding violations occur when you buy a security in a cash account that lacks sufficient settled funds and then sell the same security before depositing funds to pay for its purchase. This violation can occur whether the purchase and sale occur on the same day or on different days. 

  • The situation: 
    • Mr. Smith starts the day with $100 of settled cash in his account, and buys $1,000 of XYZ stock. The remaining $900 needed to cover the trade is due by the settlement date on T+2.
    • The next day, Mr. Smith still hasn’t deposited the outstanding $900 he owes, but sells his XYZ shares for $1,500.
  • The violation: Mr. Smith sold stock before paying for its purchase.
  • The consequence: Industry regulations require the brokerage firm to freeze the account for 90 days, during which time trading is restricted to the amount of settled funds available. (At its discretion, Schwab may impose permanent restrictions or account closures.)
  • Schwab cannot waive this restriction. However, if funds are deposited within the payment period to cover the entire purchase—generally four business days after the trade date—the violation may be downgraded to a good faith violation.

Liquidation violations are based on trade dates rather than settlement dates. There are two types of liquidation violations: cash liquidation violations and margin liquidation violation.

A cash liquidation violation occurs when you sell a security and use the proceeds to cover the purchase of a different security you bought on a prior trade date. Although similar to a freeriding violation, the primary difference between a liquidation violation and a freeriding violation is that you are selling a security other than the one you purchased and using its proceeds to cover the other trade.

  • The situation:
    • Mr. Lee starts with settled shares of XYZ stock and $100 in settled cash, and buys UVW stock for $1,000. The remaining $900 in settled funds needed to fully pay for the UVW purchase is due by the settlement date onT+2.
    • On T+2, Mr. Lee places an order to sell some of his XYZ stock instead of depositing the $900 he still owes for the UVW stock.
  • The violation: In deciding to initiate a sell order for XYZ stock on the settlement date for his UVW purchase instead of providing the cash he still owed, Mr. Lee committed a liquidation violation. If he had sold enough settled, fully paid for XYZ stock on the same day the bought the UVW stock, that transaction would have settled in time to cover his obligation.
  • The consequence:
    • The first liquidation violation in an account generally results in a notification, but no restrictions. (Note that Schwab may at its discretion impose permanent restrictions or account closures.)
    • The second through fourth non-freeride violations in a rolling 12-month period can lead to a 90-day settled-cash restriction, meaning trading is limited to the amount of settled funds available in your account. At Schwab, clients can use a one-time exception—i.e., once in the life of the account—to remove such a restriction.
    • The fifth violation of any kind generally results in a permanent settled-cash restriction.

A margin liquidation violation occurs when your margin account has both a Fed call and a regulatory maintenance call, and you sell securities in the account to cover the calls.

  • A Fed call represents the deposit amount needed to meet the Federal Reserve Board’s Regulation T requirement (Reg T) for trades in a margin account. According to Reg T, you may borrow up to 50% of the total purchase price of a margin security, and fund the remaining 50% with cash.
  • A maintenance call occurs when a brokerage account falls below the brokerage firm’s established minimum equity requirement. Schwab’s maintenance requirement for equity securities is generally 30% of current market value, though this amount may vary depending on the type of security. A regulatory maintenance call occurs when the account falls below the regulatory minimum requirement, which is 25% for equity securities.

When making a trade, the time it takes to receive a confirmation after an order has been placed varies depending on the type of order, the liquidity of the market being traded, and whether a market is open for regular trading or not. Getting your order executed is called a fill, and several considerations go into how quickly you’ll get your fills back from your broker.

Key Takeaways

  • A fill is when you receive back the prices and amounts of the trades you’ve entered with your broker, the timing of which will be impacted by order type and market conditions.
  • Market orders provide for fairly immediate fills, but you cannot control the prices you’ll receive on your orders.
  • Limit orders guarantee a price, but you may not get filled until the stock price reaches your limit.
  • Once orders are filled, they can take an additional couple of days to go through the clearing and settlement process, although you’ll see them in your account pretty much right away. 

Market Orders: Immediate Fills

Orders placed between 9:30 a.m. and 4:00 p.m. Eastern Standard Time Monday to Friday on the New York Stock Exchange or Nasdaq are sent to the market right away. Unless specifying that an order is an extended market order, orders to buy and sell stock placed outside these times sit until the market reopens.

A market order in a liquid stock such as Apple (AAPL) or Meta (META), formerly Facebook, is almost always filled and confirmed immediately. However, an order with a smaller, less-liquid stock may take longer to fill and receive confirmation from a broker. It’s impossible to tell exactly how long; it all depends on if there’s an “ask” on the other side of the “bid” (or vice versa) that can fill the trade. If the trade is a limit order, the trade could take significantly longer to fill—if it’s filled at all.

Stock Orders That May Take Longer to Fill

Orders with conditions such as limits, stop-losses, stop-buys and all-or-nothing may sit for an indeterminable amount of time before being filled, or they may never be filled at all. Market orders for large amounts of stock in thinly traded markets may receive several partial fills over a period of time, which varies depending on the amount of stock available.

It is almost always advisable to buy or sell using limit orders, even if the limit is 20 or 30 cents above the market price (for a buy order) to ensure the receipt of a fair fill. There are instances when liquidity may disappear (even in shares such as AAPL or META) for a short time period, causing investors to get filled with market orders at a much higher or lower price than expected. Orders for large amounts of stock should either be broken up or made using limit orders.

How to Know When a Trade Placed With a Broker Is Confirmed

When placing a trade with a broker online or over the telephone, ensure the trade has been executed and confirmed. 

Online brokers have different trading platforms. Most have an order entry screen and a screen for orders of different statuses: open, filled, partially filled, and canceled. After entering an order, view these screens to ensure the intended action is taken. If you want to cancel an order, check the screen for canceled orders and open orders to ensure that the original order was actually canceled. Make sure it is reflected in the canceled order screen as well.

When investing over the telephone, get a verbal confirmation from the broker on the quantity filled and the price. With these details, you can be confident that your broker has carried out your wishes. A few days after you have made the trade over the phone, you should receive a confirmation in the mail (or online) from your broker. Ensure that the details of this confirmation match your trading intentions. Usually, trades made by phone are visible on the company’s website or trading platform as well, so you can confirm them immediately.

Trade Settlement and Clearing

After a trade is executed, the transaction enters what is known as the settlement period. During settlement, the buyer must make payment for the securities they purchased while the seller must deliver the security that was acquired. Depending on the type of security, settlement dates will vary. Most stocks today in the U.S. settle T+2, meaning they are cleared in your account 100% by the second business day after the trade.

As an example of how settlement dates work, let’s say that an investor buys shares of Amazon (AMZN) on Monday, Jan. 28, 2019. The broker will debit the investor’s account for the total cost of the order immediately after its filled, but the status as a shareholder of Amazon will not be settled in the company’s record books for the investor until Wednesday, Jan. 30. At that time, the investor would become a shareholder of record.

Once the trade has settled, and the funds in any sale of stock or another type of security have been credited to your account, the investor may choose to withdraw the funds, reinvest in a new security or hold the amount in cash within the account. For those looking to cash out some of the profits (or what’s left from a loss), check to see if your broker offers transfers to your bank account using the Automated Clearing House (ACH) or by using a wire transfer.

Written by Jane