Under the terms of organized securities markets, purchases should be settled in how many working days?

Question

Options

• Atwo
• Bthree
• Cfive
• Dseven

• A
  7% (4)
• B
  78% (47)
• C
  12% (7)
• D
  3% (2)

Explanation

Option B (three working days) reflects the standard T+3 settlement cycle used in organized securities markets under traditional regulatory frameworks - meaning trades must be settled three business days after the transaction date. This rule ensures enough time for brokers, clearing houses, and custodians to transfer funds and securities between parties.

Why the distractors are wrong:

• A (two): T+2 is a more modern standard (adopted in the US in 2017 and many global markets since), so while it exists in practice today, exam curricula referencing the traditional rule still test T+3.
• C (five) and D (seven): These are too long; organized markets are designed for efficient, timely settlement, and such extended periods would introduce excessive counterparty risk and capital inefficiency.

Memory tip: Think of "T+3" as "Trade + 3" - the three days give both buyer and seller time to "get their act together" (arrange payment, transfer certificates, confirm positions). Associate the number 3 with the three parties typically involved: buyer, seller, and the clearing house.

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