Lesson 5.5 · 5 of 5 · Exchanges, indices and orders
What happens after you buy a share: settlement, custody, dividends
Once your order fills, the shares become officially yours within one or two working days: that is settlement. Your broker holds them in custody, kept apart from its own money and shares. As a shareholder you receive dividends, take part in splits and can vote at shareholder meetings.
Terms in this lesson
- Settlement (T+1, T+2)
- How many business days it takes for the shares to reach the buyer and the money the seller.
- Investor compensation scheme
- The protection that returns your cash and shares, up to a limit, if your broker goes bankrupt.
- Dividend
- The part of its profit a company pays to shareholders, in cash.
- Stock split
- The company turns each share into several cheaper ones. What you own is worth the same.
Opening question
You buy US shares on a Monday and the order fills instantly. When does settlement, the official transfer of shares and cash, take place?
Since 28 May 2024, US trades settle at T+1: one working day after the trade. Your app shows the shares straight away, but the official transfer completes the next day.
It does not matter if you get it wrong: trying first helps you remember.
What is settlement (T+1, T+2)
Definition
What is settlement?
The point at which the shares officially reach the buyer and the cash reaches the seller.
Settlement is written as T plus a number of working days, where T is the trade date. The US has settled at T+1 since 28 May 2024. In the EU, the cycle set by EU law is T+2 (T+1 from 11 October 2027). In the UK: T+2 (T+1 planned from 11 October 2027).
- Day Tyour order fills on the exchange
- T+1settlement in the US
- T+2settlement in the UK and EU, until the move to T+1
Check yourself
In October 2026 you buy shares on the London Stock Exchange on a Thursday. With no bank holiday, when do they settle?
In October 2026 London settled at T+2, two working days: Friday is T+1 and Monday is T+2. Weekends don’t count.
What is custody of shares
Definition
Where are your shares actually held?
In custody: in accounts your broker keeps separate from the firm’s own money and shares.
Shares are no longer paper certificates. They exist as electronic records at a central securities depository, such as CREST in the UK or DTC in the US. Your broker usually holds them for you in a nominee account pooled with other clients, but kept apart from its own assets. If the broker fails, clients’ shares should not end up with its creditors.
Myth or fact?
“If my shares halve in value, the FSCS will pay me back.”
Myth. Compensation schemes cover only the cash or shares a failed broker cannot return. Falling prices are your risk as an investor.
Dividends, stock splits and shareholder votes
Hold the shares before the ex-dividend date and you receive the dividend, usually after any withholding tax.
In a 10-for-1 split, as Nvidia did in June 2024, each share becomes ten and the price is divided by ten.
You can vote at the annual general meeting, even with one share, if your broker passes votes on. Some let you vote online.
Put in order
Put in order what happens after you buy a US share that pays a dividend.
This exercise is in the free account, where we also save your progress.
Create a free accountCheck yourself
You own 10 shares at $300 each. The company does a 2-for-1 split. What do you have afterwards?
This exercise is in the free account, where we also save your progress.
Create a free accountWhat would you do?
Your broker tells you a company you own is doing a 10-for-1 split. What do you do?
This exercise is in the free account, where we also save your progress.
Create a free accountWhat you learned
- US trades have settled at T+1 since 28 May 2024; the EU cycle is T+2 (T+1 from 11 October 2027) and the UK’s T+2 (T+1 planned from 11 October 2027).
- Your broker keeps your shares apart from its own, and compensation schemes protect you only if it fails.
- As a shareholder you receive dividends, take part in splits and can vote; a split doesn’t change your wealth.
You reached the end
Keep what you learned
With a free account we remember your lessons, bring back the questions you got wrong exactly when you need them and keep your streak.
Save your progress with a free accountLessons are educational. They are not a recommendation to buy or sell. Investing involves risk and you can lose money. Sources: SEC T+1 rule for the US (from 28 May 2024); HM Treasury (draft UK legislation for T+1 from 11 October 2027, published 20 November 2025); Regulation (EU) 2025/2075 (EU T+1 from 11 October 2027); FSCS (£85,000); SIPC ($500,000, including $250,000 in cash); Directive 97/9/EC (minimum €20,000 in the EU); Nvidia’s 10-for-1 split of June 2024.