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 may not get filled until the stock price reaches your limit.
- Most trades settle in one business day although it can vary based on the type of asset traded.
Market Orders: Immediate Fills
Orders placed between 9:30 a.m. and 4:00 p.m. ET Monday to Friday on the New York Stock Exchange (NYSE) or Nasdaq are sent to the market right away. Unless specifying that an order is an extendedmarket 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) is almost always filled and confirmed immediately. However, an order for a smaller, less liquid stock may take longer to fill and receive confirmation from a broker. It's impossible to tell exactly how long because it all depends on whether 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. In some cases, they may never be filled at all.Market orders for large amounts of stock in thinly traded markets may receive several partial fills over 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 Apple or Meta)for a short 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.
When Is a Broker Trade Confirmed?
When placing atrade with a brokeronline or over the telephone, ensure the trade has been executed and confirmed.
Online brokershavedifferent 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 canceled. Make sure it is reflected in the canceled order screen as well.
When investing over the telephone, get 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 make the trade over the phone, you should receive confirmation in the mail (or online) from your broker.
Ensure that the details of this confirmation match your trading intentions. Trades made by phone are usually 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. Settlement dates depend on the type of transaction. For now, most orders in the U.S. settle T+1. This means they are cleared in your account one business day after the trade is initiated.
Let's say an investor buys Amazon (AMZN) shares on Jan. 28 (a Monday). The broker will debit the investor's account for the total cost of the order immediately after it's filled, but the investor's status as an Amazon shareholder isn't settled in the company's record books until Jan. 29 (Tuesday). That's when the investor becomes a shareholder.
Once the trade settles and the funds in any sale of stock or another type of security are 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.
Why Does It Take Time to Settle a Trade?
Some time is required to ensure the trade gets processed correctly. The buyer’s funds need to clear, paperwork needs to be filled out, ownership needs to be transferred, and so forth. Technology has greatly sped up this process and from 2024, this should all soon be doable in one day.
Do All Trades Take 2 Days to Settle?
No, not all trades settle within two business days. As of May 28, 2024, financial regulators in the U.S. changed the settlement period from T+2 to T+1 for most trades, including stocks, bonds, exchange-traded funds (ETFs), municipal securities, and some mutual funds. The goal was to mitigate the risk to market participants. Other assets, such as currencies, continue to settle within two business days.
What Happens After Trade Confirmation?
Once your trade has gone through, your broker will issue a document reporting the details of the trade. This document, called a brokerage trade confirmation, confirms the order you placed has been completed. If you sold securities or bought them, this should now be visible in your account.
The Bottom Line
The time it takes for ownership to transfer hands in a trade can vary. You’ll get immediate feedback from your broker that your request has been actioned. Getting confirmation, however, that it has gone through will take longer and depends on various factors, such as the type of order, the liquidity of the market being traded, and whether the market is open or not.
The standard settlement cycle for most securities is one business day, meaning if you place an order on Monday it should settle on Tuesday. This applies to most securities, such as stocks, bonds, and ETFs. Other assets, such as currencies, continue to settle over two business days.
