Canadian Securities Course (CSC) Level 1 Practice Exam

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When do Tbills settle vs. when do other securities settle?

Tbills settle on the second clearing day
Other securities settle on the day of the transaction
Tbills and other securities settle on the same day
Other securities settle on the second clearing day

The correct answer is: Other securities settle on the day of the transaction

In the context of settling transactions, Treasury bills (T-bills) have a unique settlement period compared to other securities. T-bills typically settle on the second business day after the transaction, known as T+2. This means that if an investor purchases T-bills on a Monday, the settlement would occur on Wednesday. The answer indicating that "other securities settle on the day of the transaction" can lead to confusion. Most securities, such as equities, also settle on a T+2 basis, similar to T-bills, not on the same day. However, in certain instances, like cash transactions in stocks where the purchaser desires immediate transfer, the settlement can occur on the transaction day itself. Therefore, while T-bills are specific in their T+2 settlement, the reference to other securities is misleading if interpreted as all securities settling immediately. It's essential to recognize that the normal settlement period for most securities, including equities, is also T+2, aligning with the settlement of T-bills, but one must consider the variations that may apply in specific trading circumstances.