What happened if I use unsettled funds to buy stocks?

[luvya]

Quote "You are using unsettled funds for this purchase. If you sell this purchase prior to the settlement date of the funding sale, without additional funds being deposited, it will be considered a free ride under federal reserve regulation T"


WTF is this? I recently sold my Intel stocks and now I am ready to buy stocks from another company, and this window pops up....I wonder if this will affect me? If so, how?

 

[GasX]

When you sell a stock, you get the price at that moment, but it takes a while for the transaction to get fully reconciled through the system. Liken it to having to send the stock certificates in to your broker for him to forward on to the new owner. If you use the money from the sale of stock A to Buy Stock B and then sell B to buy C, you are, at some level, trading on the brokerages money.

The laws are obviously changing on this and beyond the above I can't explain it any better as I don't know exactly what the new laws say...Suffice it tosay that things they are a changin'

 

[BaboonGuy]

You can't sell the next stock you buy for 3 days, I am pretty sure that is what it means

 

[luvya]

This is kinda cumbersome, how long does it usually take to get settled?


Anyhow, I just purchased the new tocks, I plan to hold it more than 3 days, hopefully that will be fine.