What does the T+2 settlement cycle signify in securities trading?

The T+2 settlement cycle refers to the process by which transactions involving securities are concluded two business days following the trade date. This means that if a trade is executed on a Monday, the actual settlement—when the buyer pays for the securities, and the seller transfers ownership—occurs by Wednesday.

This two-day period allows both the buyer and seller sufficient time to ensure that the necessary funds and securities are available for the transaction to be completed smoothly. T+2 has been widely adopted in many markets around the world, as it improves the efficiency of settling trades compared to longer settlement periods, thereby reducing counterparty risk and optimizing the flow of capital in the markets.

The other options do not accurately reflect the T+2 timeframe, which is specifically set at two business days after the trade date.