In a typical transaction, what does T + 3 refer to?

The term T + 3 refers to the settlement cycle for securities transactions, specifically indicating that the settlement of a trade occurs three business days after the actual trade date. This means that when a trade is executed, the transfer of the securities and the payment for those securities is completed three business days later.

This practice allows time for the involved parties and their respective clearinghouses to process the trade, verify the details, and ensure that the proper funds and securities are transferred. Understanding the concept of T + 3 is important in the context of trading and investing, as it affects how long investors must wait to have their trades settled and reflect in their accounts.

It's worth noting that industry practices may change over time, and there have been discussions about moving to shorter settlement periods, but T + 3 has been the standard for many years, particularly in the U.S. stock markets.