Settlement (finance)
Settlement of securities is a business process whereby securities or interests in securities are delivered, usually against (in simultaneous exchange for) payment of money, to fulfill contractual obligations, such as those arising under securities trades.
In the U.S., the settlement date for marketable stocks is usually 3 business days after the trade is executed, and for listed options and government securities it is usually 1 day after the execution.
As part of performance on the delivery obligations entailed by the trade, settlement involves the delivery of securities and the corresponding payment.
A number of risks arise for the parties during the settlement interval, which are managed by the process of clearing, which follows trading and precedes settlement. Clearing involves modifying those contractual obligations so as to facilitate settlement, often by netting and novation.
Read more about Settlement (finance): Nature of Settlement, Legal Significance, Immobilisation and Dematerialisation, Direct and Indirect Holding Systems, Regular Business Days From Trade Date; Dates/terms To Settle Instruments
Famous quotes containing the word settlement:
“... if the Settlement seeks its expression through social activity, it must learn the difference between mere social unrest and spiritual impulse.”
—Jane Addams (1860–1935)