The terms “T+0”, “T+1” and “T+2” refer to the settlement and clearing timeline. Currently, the Hong Kong stock market uses a T+2 settlement and clearing cycle.

“T” stands for trading day. For buying and selling Hong Kong stocks, intermediaries and the Central Clearing and Settlement System (CCASS) will complete the settlement of the stocks and funds on the second trading day after the transaction (i.e. T+2).

T+2 refers to the securities settlement arrangements between the clearing house and exchange participants, whereas commercial agreements govern the settlement arrangements between intermediaries and investors. Depending on the relationship between the investors and the intermediaries as well as the latter’s risk management policy, some intermediaries ask for cash upfront for buy orders, while others may ask for payment on T or on T+2. Meanwhile, some intermediaries may require prior delivery of stocks for sell orders, while others may allow investors to deposit the shares after the sell orders have been executed. Investors should read the terms and conditions of the client agreement carefully when opening an account.

Hong Kong investors can trade A-shares listed in Shanghai and Shenzhen through the Mainland-Hong Kong Stock Connect. The settlement cycle for these two markets is different from Hong Kong as shares are settled on T, whereas payment is settled on T+1.

Investors should read the client agreement carefully to understand the related implications. For example, if investors want to sell A-shares, the shares must be transferred to the broker’s account (unless a special segregated account arrangement is in place) before the market opens on the selling day (T day) to execute the transaction timely.

Although the settlement cycle for Hong Kong stocks is T+2, day trading is allowed. You can buy Hong Kong stocks on T day and sell them on the same day (a T+0 transaction).

In contrast, Mainland stock markets do not allow day trading. Shanghai and Shenzhen A-shares purchased through the Stock Connect can only be sold on T+1 or later.