Business Day

A Business Day (also known as a 'Trading Day') is any day that financial institutions, like banks and stock exchanges, are open for business. Think of it as the market's official workweek. It typically runs from Monday to Friday but crucially excludes weekends and public holidays. So, while a calendar week has seven days, a typical trading week has only five. This distinction is vital for investors because most financial activities—like buying or selling shares, settling trades, and processing fund transactions—can only occur on these days. For instance, an order you place on a Saturday won't even be looked at until the market opens on Monday morning. The specific holidays observed can vary between countries (e.g., Thanksgiving in the U.S. vs. Boxing Day in the U.K.), so it's always wise to check the calendar for the specific market you're investing in.

Understanding the concept of a business day isn't just academic; it has real-world consequences for your portfolio. It affects how quickly your trades are finalized, your eligibility for dividends, and the price you get for your fund investments.

When you click “buy” on a stock, you don't instantly own it in the legal sense. The transaction enters a settlement period, which is the time it takes for the security to be officially transferred to your account and the cash to be moved to the seller's account. This period is always counted in business days. The standard notation is “T+X,” where:

• T stands for the transaction date—the day you made the trade.
• X is the number of business days until settlement.

For a long time, the standard for stocks in the U.S. was T+2 (two business days). However, as of May 2024, the U.S. and Canadian markets moved to an accelerated T+1 settlement cycle. Example: You buy a U.S. stock on a Friday.

• Under T+2: The trade would settle on the following Tuesday (Friday is T, Monday is T+1, Tuesday is T+2), assuming Monday isn't a public holiday.
• Under T+1: The trade settles on Monday, the very next business day.

This faster settlement reduces risk in the financial system and means your cash is freed up or your securities are delivered sooner.

Companies often perform a corporate action that affects shareholders, such as paying a dividend or executing a stock split. Your eligibility for these actions is determined by deadlines measured in business days. The most common example is the ex-dividend date. To receive a company's upcoming dividend, you must own the stock before this date. If you buy the stock on or after the ex-dividend date, the seller gets the dividend, not you. Because of the settlement cycle, you actually need to buy the stock at least one business day before the ex-dividend date to be the official “shareholder of record” in time. It’s a classic timing game where weekends and holidays can trip you up if you aren't paying attention. The same logic applies to other corporate events like a rights issue.

If you invest in a mutual fund or most ETFs, your transaction price is based on the fund's Net Asset Value (NAV), which is calculated once per day after the market closes.

• If you place an order to buy or sell fund shares during market hours, you'll get that day's closing NAV.
• If you place the order after the market closes, or on a weekend or holiday, your order will be executed at the NAV of the next business day.

This means the price you get could be different from what you expected if the market moves significantly overnight.

While the mechanics of business days are essential for executing trades, a true value investor knows not to get lost in the weeds. The market may sleep on weekends, but a great business never does. A well-run company is creating value, serving customers, and innovating 365 days a year, not just on the 252 or so trading days. The “business day” is a construct of the market, not a measure of the underlying business's worth. Use your understanding of it to be a savvy operator in the market, but keep your focus where it belongs: on the long-term value and quality of the companies you own. The daily noise of the market is a distraction; the steady hum of a great business is where real wealth is built.