Settlement Process

Introduction to Settlement: The settlement process is a critical component of the securities trading cycle, ensuring that transactions are completed efficiently and securely.
Key Components: The settlement process involves several key components, including:
- Determination of Settlement Obligations: This involves calculating the obligations of buyers and sellers to exchange securities and funds.
- Settlement of Funds: This refers to the transfer of funds between buyers and sellers to complete transactions.
- Settlement of Securities: This involves the transfer of securities from sellers to buyers.
- Auction of Securities: In cases where a buyer or seller fails to meet their obligations, securities may be auctioned to complete the transaction.
- Corporate Actions Adjustment: This involves adjusting the settlement process to account for corporate actions such as dividends, stock splits, and mergers.
Important Terms:
- Settlement Date: The date on which the settlement of a transaction is completed.
- Trade Date: The date on which a trade is executed.
- Clearing and Settlement: The process of determining settlement obligations and completing the transfer of securities and funds.