FAQ - Section 1
What on earth's all this T business then?

 1.1 T+25 in a nutshell

T+25 is a way of extending the settlement due on a particular trade. The T is a reference to today, so T+25 would be talking about a settlement date 25 WORKING days from the day you buy some shares. Normally buys/sells are performed on a T+5 or T+10 basis (depending on your broker). However, you can speculate with money you don't have (or possibly do) using extended settlement dates such as T+15, T+20, T+25. Thus, you could buy shares, wait up to 22 days to be in profit on the deal (see Closing a Deal), and then sell the shares and pocket the (hopefully positive) difference.

The types of T+ deal you can get will vary from broker to broker, and most will want some kind of 'Frequent Trader' account, or a nominee share account, before they will let you trade this way. The type of accounts that let you trade like this may well charge a higher commission, and the Market Maker may want a couple of extra pence per share for giving you 'credit'. Also be aware that you WILL pay buying AND selling commissions, even though you are closing a deal (though some brokers may offer a discounted rate for closing deals). All these factors need to be taken into account when you make the deal, are you SURE your share pick is going to make you a profit under these circumstances?

Be aware that speculation with T+ deals is GAMBLING by another name, and hence make sure you know what you are doing BEFORE you try (i.e. if you're faint hearted, or a beginner, DON'T TRY IT!). Try running a paper portfolio for a while, and perhaps bear in mind some pointers on the matter (learnt the hard way by people like Dan).

 1.2 Closing an extended settlement deal

With an extended settlement deal, you're hoping that you can buy a share, the price will go up in your extended time, and then you can sell the shares before the settlement date (perhaps even on the same day you brought them!). Then lo-and-behold your broker pays YOU some money on the settlement date (the profit from the sale, minus all the commissions). If you've made a loss, then the broker will deduct that difference, plus all the commissions, from your bank account.

Most brokers will allow you to close a deal 2 (working) days before the settlement date. Unfortunately things such as direct debits are usually set up 2 days before hand as well, so you may be safer closing deals 3 days before. You must make it clear to your broker that you are CLOSING a deal, and not just selling some shares. If you just sell shares (usually on a T+5 settlement) then you are effectively selling short and will receive a buy-in notice from the stock exchange. Your brokers will either not let you do the trade to start off with or tell you off at a later date. Tell your broker you are CLOSING the deal, and give them the reference number of your purchase contract note.

 1.3 Points to keep in mind with T+ deals

Some sensible points to keep in mind when you're thinking about becoming a speculator:

1. Buy only blue chips e.g Rolls Royce or Orange. Don't play with big money and on T+25 with penny shares.
2. Buy shares with NMS (Normal Market Size) of 15000 or more. Less than this means you may have trouble buying or selling your shares at the price you want, and may move the price inadvertently on your own.
3. Look for volatility in the stock (this will enable you to have a rough guide as to what price the stock usually averages around)
4. Time your purchase carefully, hopefully when the price has gone down, not up. This can often best be done on a Friday at 4 p.m. when most people are selling. Hopefully buyers will return on Monday (if Japan or Wall Street don't go belly up over the weekend!)
5. Tell your broker that you want to buy on T+25 (Some brokers have had to charge an extra 1 or 2 pence on the purchase price, this is due to the market maker wanting to squeeze more out of you).
6. Hold on tight....and keep watching the stock at least once a day.....or place a limit order with your broker (for 4 weeks if possible) to CLOSE to sell if you feel you have made a decent return after all your costs.
7. Close to sell when ever you feel you are making a sizable return, but don't leave it to the last moment. It only puts unnecessary pressure on yourself. Better to close 5-6 days before settlement. And remember "never be afraid to take a profit", greed can often get the better of you, and is one of the investors worst enemies.
8. If you are making a loss, and feel you want to bail out, then do so. If you feel you can afford to pay for the eventual settlement and want to hold on, then it should pick up some time soon if you've picked an OK Company to start with.
9. Don't buy a T+25 purchase with a hangover!.

 1.4 What's Cash & New when its at home?

Cash & New is a way of extending your (probably) extended settlement term (you mad fool!) for a fee. It hangs upon your broker understanding the term, and not merely selling your shares and then buying them again, as this'll cost you the full bid/offer spread, plus all the dealing costs (MAKE SURE your broker is doing the right thing!). The key to Cash & New is that you should be able to deal inside the usual spread (the spread for C & N should be around 1% of the share value, as a rule of thumb). Cash & New on a FTSE stock can sometimes work out cheaper (more market makers, greater liquidity, etc.).

Suppose you had requested a T+20 trade, but at (or, more likely, towards) the end of the 20 days, you haven't made the huge profit you expected. At this point, instead of selling out or coughing up the cash (which you probably can't afford to!), you CASH & NEW your deal, whereby you get another 20 days settlement by paying some extra premium (the difference between buying and selling price), plus another commission to your smiling broker.

As an example, on the 16th Dec., TMCF cashed & newed his Shield shares at the end of his T+20 period. The full spread was £7.50 - £7.65, and so he sold his shares at £7.50, but then paid only a 6p premium to re-purchase them at £7.56. This then got him a further 20 days credit, with the 6p premium going to the Market Maker for playing banker. Note that dealing charges and stamp duty are still charged on the sale/purchase, and some of them will have to be paid at the end of the original T+20 period (along with any loss you may be currently incurring!).

Note that just like closing a T+ deal, you'll need to give your broker some notice in order to Cash & New, 2 to 5 days seems to be the norm. Finally, you should be able to Cash & New many times in succession, but unless you're particularly sure about the share, this will soon become an expensive hobby.

 1.5 T+25 when shares get suspended!

A warning to those who hold shares on a T+25 basis (this became important for Card Clear holders in early 1998).

Remember that if a stock which you hold on a T+ deal is suspended, even temporarily, and your settlement date is soon approaching, you WILL be liable to pay for the stock. There will be no possibility of cash-and-new or closing the deal, so remember to either close the deal before suspension or gather all those pennies to pay for the stock.

In this situation, it may be worth buying the stock outright if the news is going to be good.

(all the previous points have been taken from contributions on the BB from DavidT, Robin, MIB, Samir, Sonia, Pinsticker, TMCF, and, of course, Dan)

Why not check out Dan's web page:http://www.city.ac.uk/~ey143/index.htm