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Settlement rate |
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Settlement rateThe rate suggested in Financial Accounting Standards Board (FASB) 87 for discounting the obligations of a pension plan. The rate at which the pension benefits could be effectively settled if the company sponsoring the pension plan wishes to terminate its pension obligation.Settlement rate Similar MatchesContinuous net settlement (CNS)Continuous net settlement (CNS)Method of securities clearing and settlement using a clearing house, which matches transactions to securities available, resulting in one net receive or deliver position at the end of the day. Settlement riskSettlement riskThe risk that one party will deliver and the counterparty will not be able to pay and vice versa. Settlement dateSettlement dateThe date on which payment is made to settle a trade. For stocks traded on US exchanges, settlement is currently three business days after the trade. For mutual funds, settlement usually occurs in the US the day following the trade. In some regional markets, foreign shares may require months to settle. Immediate settlementImmediate settlementDelivery and settlement of securities within five business days. Rolling settlementRolling settlementSettlement is the process by which investors pay for shares they have bought and receive payment for shares they have sold. Before July 1994, this process was done by means of an 'account period', normally ten working days. All the transactions during that period were balanced against each other to produce a single figure, which was either paid to the investor or due from him, depending on whether the value of his purchases was higher or lower than the value of his sales in the period. One of the features of the account period was that transactions taking place at the beginning of it (say, Day 1) didn't have to be settled until about 14 days later, whereas transactions at the end (say Day 10) had to be settled within 4 days.In July 1994, the account period system was replaced by ten day (T+10) rolling settlement, which means that each transaction has to be settled ten days after the transaction date. This was subsequently reduced to five days (T+5) and in February 2001 was reduced to three days (T+3).These significance of rolling settlement and of shortened settlement times is that when investors sell shares, the proceeds get paid into their account quicker, and when they buy shares they have to pay for them quicker. It requires careful money management on the part of the investor. Further SuggestionsExercise settlement amountcash settlement Same Day Funds Settlement (SDFS) Skip day settlement Dispute settlement mechanism Bank for International Settlements settlement Settlement price Settlement options Regular settlement Dispute Settlement Body Cash Settlement Exchange Delivery Settlement Price Structured settlement Settlement Bank for International Settlements (BIS) Insurance settlement Cash settlement contracts Real Estate Settlement Procedures Act (RESPA) Short settlement Good delivery and settlement procedures Cash sale or settlement settlement day settlement options Dispute settlement |
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