SettlementSettlement is what happens after your broker has bought or sold shares on your behalf. There are three aspects to it:Transfer of ownershipIf you have a nominee account with your broker, the shares you buy or sell are registered in the broker's name, and responsibility for sorting out changes of ownership rests with the broker and the registrar.If you have a certificated account, and you have sold shares, you have to send the share certificate(s) to the broker so that settlement can be effected. If you have bought shares, you will receive a share certificate from the company's registrar either direct or vis your broker.Payment when you buy sharesShare purchases have to be paid for. If your broker works on a 'cleared funds' basis, you will have to have enough money in your broker account to pay for the shares and transaction costs before you buy them. If you haven't got the money available, the broker's system will spot the deficit, and will not process the order.For offline trading, your ability to buy 'on credit' will depend on the kind of relationship you have with your broker. If you have £300 in your account and want to buy £12,000 of shares, eyebrows will be raised and you may be asked to deposit money with the broker before the order is processed.Once a broker has bought shares on your behalf, you have an obligation to supply him with funds prior to the settlement date. Most brokers will accept cheques, direct bank transfers, and debit cards. It is important to check how your broker accepts payment beforehand.Receipt of proceeds when you sell sharesWhen you sell shares, the broker will credit funds to your client account after deducting commission. It is then up to you to decide what to do with that money. You can ask your broker to send the money to your normal bank account, or you can reinvest it in the market, or you can leave it in the client account where it will earn interest.The timing of payment will depend on the settlement time of your transaction. The industry standard used to be T+5 but this changed to T+3 in February 2001. The '5' and '3' simply indicate the number of working days after the transaction date by which settlement must be complete.
SettlementWhen payment is made for a trade.
Exercise settlement amountExercise settlement amount
The difference between the exercise price fo the option and the exercise settlement value of the index on the day an exercise notice is tendered, multiplied by the index multiplier.
Same Day Funds Settlement (SDFS)Same Day Funds Settlement (SDFS)
A method of settlement used in trading between well-collateralized parties in good-the-same-day federal funds used by the Depository Trust Company for transactions in US government securities, short-term municipal notes, medium-term commercial paper notes, CMOs, and other instruments.
Good delivery and settlement proceduresGood delivery and settlement procedures
Refers to PSA Uniform Practices such as cutoff times on delivery of securities and notification, allocation, and proper endorsement.
Short settlementShort settlement
Trade settlement made prior to the standard five-day period due to customer request.
Uniform Settlement StatementUniform Settlement Statement
The Standard HUD Form 1 required to be given to the borrower, lender and seller at, or prior to, settlement.
Further SuggestionsNext day settlement
Dispute settlement mechanism
Cash settlement contracts
Dispute Settlement Body
Continuous net settlement (CNS)
Bank for International Settlements (BIS)
Real Estate Settlement Procedures Act (RESPA)
Regular way settlement
Bank for International Settlements
Cash sale or settlement
Exchange Delivery Settlement Price
Skip day settlement