Settlement

Settlement refers to the process in which securities and cash are exchanged between the buyer and seller of a transaction. After a transaction is executed, there is an agreed-upon time frame within which settlement must occur. This can typically range from a few hours to several days, depending on the type of security and the exchange on which the transaction is taking place.

During the settlement process, the securities are transferred from the seller's account and moved to the buyer's account, while the corresponding amount of cash is transferred simultaneously. This ensures that both parties complete their agreed-upon transaction and minimizes risk for both sides.

For investors, it is important to adhere to settlement deadlines to ensure that they fulfill their obligations in a timely manner and avoid penalties or losses due to late payments or transfers.