SIE Trading and Settlement: Order Types, T+1 and Why the Ex-Date Now Equals the Record Date

Dates are where outdated study material does the most damage on this part of the SIE. Before May 28, 2024, regular trades settled two business days after the trade, and the ex-dividend date came one business day before the record date. Since then, both rules have moved by a day. If your notes still say T+2, the dividend questions will come out wrong even when your reasoning is right.

What topic 3.1 of the SIE outline covers

FINRA's 2025 content outline groups trading under 3.1, inside the section worth 23 of 75 scored questions:

• Orders and strategies: buy and sell, bid and ask, principal vs agency capacity, long and short, bullish and bearish, and order types such as market, stop, limit and good-til-canceled, discretionary or not, solicited or not
• Investment returns: components of return, cash and stock dividends, dividend payment dates, yield measures and cost basis
• Trade settlement: settlement time frames such as T and T+1, and physical vs book-entry delivery
• Corporate actions: splits, reverse splits, buybacks, tender offers, exchange offers, rights offerings, mergers and acquisitions, proxies

This guide covers orders, settlement, dividend dates and corporate actions. Yield and return calculations are a math topic of their own.

Order types: what each one guarantees and what it doesn't

The SEC's investor bulletins on order types give the definitions:

Where the orders sit relative to the market is a favorite question. The SEC says a buy stop is entered above the current price, generally to limit a loss or protect a profit on a short position, and a sell stop is entered below the current price, to limit a loss or protect a profit on a stock the investor owns. A buy limit fills at the limit or lower and a sell limit at the limit or higher. A memory aid from Passy: limits sit where the price would be better for you, and stops sit where it would be worse.

Time-in-force instructions come from the same bulletin. Unless the investor says otherwise, an order is a day order and generally cancels at the end of regular trading hours. A good-til-canceled (GTC) order lasts until it's filled or canceled, though firms may limit how long. The bulletin also defines immediate-or-cancel, fill-or-kill (fill the whole order immediately or cancel it) and all-or-none (fill the whole order or none of it, but it can stay open).

Two more items on the outline:

• Long and short. Investor.gov describes a short sale as selling stock you don't own, in the belief that the price will fall: a bearish position. Buying long is bullish. Option positions add covered and naked versions, covered in the SIE options guide
• Principal vs agency. SEC Rule 10b-10 requires a confirmation telling the customer whether the firm acted as agent for the customer, as agent for someone else, as agent for both, or as principal for its own account, and, if principal, whether it's a market maker in the security

Order mechanics are quick to learn and quick to confuse, and order types are among the flashcards planned for full SIE prep. For now, write the table above with your own example price for each row.

Settlement under T+1: regular way, cash and other terms

The SEC's investor bulletin explains the change. On February 15, 2023, the SEC adopted amendments shortening the standard settlement cycle for most broker-dealer transactions from T+2 to T+1, with a compliance date of May 28, 2024. Settlement means the securities move to the buyer's account and the cash to the seller's. Under T+1, a sale on Monday settles on Tuesday.

Rule 15c6-1 itself excludes several categories, including government and municipal securities and commercial paper, from its T+1 requirement, but FINRA's page on settlement cycles says T+1 applies to stocks, bonds, options, municipal securities, ETFs, certain mutual funds, U.S. government securities and exchange-traded limited partnerships. For munis, MSRB Rule G-15 sets regular way at the first business day after the trade date.

On physical vs book-entry delivery, FINRA's page notes that a customer who still holds a paper certificate must get it to the broker in time for T+1, while securities held electronically are delivered by the firm. The payment deadline in a cash account, which Regulation T ties to the settlement cycle, is covered in the customer accounts guide.

Dividend dates under T+1: record date, ex-date and payable date

Investor.gov's page on ex-dividend dates walks through the sequence:

1. Declaration: the company announces the dividend, the record date and the payable date
2. Record date: the date you must be on the company's books as a shareholder to receive the dividend. Companies also use it to decide who receives proxy statements and reports
3. Ex-dividend date: set under exchange rules. If you buy on the ex-date or later, you don't get the dividend; the seller does. If you buy before it, you do
4. Payable date: the dividend is paid

The key rule is FINRA Rule 11140(b)(1): for cash dividends and other distributions worth less than 25% of the security's value, the ex-dividend date is the record date, if that's a business day, or the first business day before the record date if it falls on a non-delivery day such as a weekend. FINRA amended the rule effective May 28, 2024, the day T+1 began. An SEC notice of Nasdaq's matching change shows the old version: the ex-date was the first business day before the record date. That's the T+2 answer older materials still give.

Worked dates, from investor.gov's 2026 example:

The large-dividend row comes from Rule 11140(b)(2), which defers the ex-date to the first business day after the payable date. Investor.gov adds that with a significant dividend, the stock price may fall by that amount on the ex-date. The options guide explains why option writers face more early assignment the day before an ex-date.

Date questions punish rushing more than ignorance, so practice them under time pressure too. An 80-question SIE mock exam, scored at the end, is planned for launch for exactly that kind of rehearsal.

Corporate actions: splits, cost basis and tender offers

Stock splits. Investor.gov defines a split as an increase in the number of shares without a change in shareholders' equity. Its example: 100 shares at $100 become 200 shares at $50 after a two-for-one split, and dividends per share fall in proportion. A reverse split works the same way in the other direction. With Passy's numbers, 500 shares at $2 become 100 shares at $10 after a one-for-five reverse split, and the position is still worth $1,000.

Cost basis. The IRS says the basis of stock is generally the purchase price plus costs such as commissions. After a split, IRS Publication 550 says to figure basis the same way as for an identical stock dividend: divide the adjusted basis of the old shares by the total number of old and new shares. If an investor can't identify which shares were sold, the IRS uses first-in, first-out. For stock acquired after 2010, the broker reports basis on Form 1099-B.

Worked example (Passy's numbers). An investor bought 100 shares for $6,000, a basis of $60 a share. After a three-for-one split, the investor holds 300 shares with the same $6,000 total basis, or $20 a share.

Tender offers. Investor.gov describes a tender offer as a broad solicitation, by the company or a third party, to buy a substantial percentage of a company's securities for a limited time, at a fixed price usually above the market. Each holder decides whether to tender. All tender offers are subject to antifraud rules and to procedural requirements, such as how long the offer must stay open and how quickly holders who tender must be paid.

A Passy practice question on dividend dates

This question was written by Passy for practice. It isn't a FINRA item.

A company declares a regular quarterly cash dividend with a record date of Thursday, June 11. There are no holidays that week. What is the last day an investor can buy the stock regular way and still receive the dividend?

A. Monday, June 8 B. Tuesday, June 9 C. Wednesday, June 10 D. Thursday, June 11

Keyed answer: C. Under FINRA Rule 11140(b)(1), the ex-date for a regular cash dividend is the record date when that's a business day, so the ex-date is Thursday, June 11. A buyer must buy before the ex-date, so the last day is Wednesday, June 10. That trade settles T+1 on Thursday, in time to be on the books for the record date. B is the answer under the old T+2 rules, and D is the ex-date itself, when buyers no longer get the dividend.

Your next step with SIE trading rules

Recheck the date logic in any notes or flashcards you already have: if a source puts the ex-date a day before the record date, it's using the T+2 rule. Then try the free SIE practice questions for a mixed check, and the capital markets guide for how trading fits into the primary and secondary markets. When you want to practice this topic alone, Trading, Customer Accounts and Prohibited Activities practice one section at a time is planned for full SIE prep.