Legal Significance
After the trade and before settlement, the rights of the purchaser are contractual and therefore personal. Because they are merely personal, their rights are at risk in the event of the insolvency of the vendor. After settlement, the purchaser owns securities and their rights are proprietary. Settlement is the delivery of securities to complete trades. It involves upgrading personal rights into property rights and thus protects market participants from the risk of the default of their counterparties.
Read more about this topic: Settlement (finance)
Famous quotes containing the words legal and/or significance:
“There are ... two minimum conditions necessary and sufficient for the existence of a legal system. On the one hand those rules of behavior which are valid according to the system’s ultimate criteria of validity must be generally obeyed, and on the other hand, its rules of recognition specifying the criteria of legal validity and its rules of change and adjudication must be effectively accepted as common public standards of official behavior by its officials.”
—H.L.A. (Herbert Lionel Adolphus)
“Of what significance the light of day, if it is not the reflection of an inward dawn?—to what purpose is the veil of night withdrawn, if the morning reveals nothing to the soul? It is merely garish and glaring.”
—Henry David Thoreau (1817–1862)