Q:

Why does Charles Schwab have a Mandatory Settlement Period after selling stocks?

Whenever I sell stocks with Charles Schwab, I cannot access the cash for 3 days after the day I make the sale. A coworker told me that this was called a "mandatory settlement period". 
I was unable to determine the reason for this - is this a restriction just in Charles Schwab that other institutions do not have, and if it is, what is the justification for it? Is this a government regulation, and if it is, what is the justification for it?

A:

It's important to understand that, in general, security transactions involve you and a relatively unknown entity with your broker standing in the middle.  When you sell through Schwab, Schwab needs to receive the funds from the other side of the transaction.  If Schwab gave you access to the funds immediately, it would essentially be a loan until the transaction settles after funds and securities change hands.  
If Schwab made funds available to you as soon as they were received, it might still be two days until the money is received; because the other side also has three days. Guaranteed one day settlement would have to include receipt of funds from the buyer in one day and Schwab can't control that. You need to remember this transaction likely includes at least one party in addition to you and Schwab. 
Here's the SEC page related to the three day settlement period, 
About Settling Trades in Three Days:  T+3

A:

Another explanation is that they keep your money three days to make money with it, because they can. The other reasons might have been valid 100 years ago, and no bank would voluntarily cut that down until forced by law.
Example: In Europe, bank to bank transfers used to take three days, until a law forced them to give next day, and suddenly it was possible.

A:

quid's answer explains the settlement period well. However, it should be noted that you can avoid the settlement period by opening a margin account.
Any specific broker like Schwab may or may not offer margin accounts. Margin accounts allow you to borrow money to avoid the settlement period or to buy more securities than you can actually afford.
Note that if you buy more securities than you can afford using margin, you expose yourself to losses potentially larger than your initial investment. If you fund your account with $50,000 and use margin to purchase $80,000 of stock which then drops in value by 80% you will have lost $64,000 and owe the broker $14,000 plus fees.

