{"id":226898,"date":"2019-10-19T10:15:02","date_gmt":"2019-10-19T04:45:02","guid":{"rendered":"https:\/\/staging-imarticus.kinsta.cloud\/?p=226898"},"modified":"2024-01-23T10:43:31","modified_gmt":"2024-01-23T10:43:31","slug":"what-are-the-types-of-trade-settlement-in-the-trade-life-cycle","status":"publish","type":"post","link":"https:\/\/imarticus.org\/blog\/what-are-the-types-of-trade-settlement-in-the-trade-life-cycle\/","title":{"rendered":"What Are The Types of Trade Settlement in The Trade Life Cycle?"},"content":{"rendered":"

Understanding Trade Settlement<\/strong><\/h1>\n

The evolution of finance and commerce as a whole has pushed the world economies to a new high. With the advent of trading of financial instruments and multiplier effect into action, the monetary growth has been multiple folds over the past few decades.<\/p>\n

Let\u2019s get deeper into what exactly is trade settlement and how does it function. Trade settlement is a transaction method wherein the securities in trade are transferred into the buyer\u2019s account and the monetary value of the security is deposited into the seller\u2019s account post a trade execution.<\/p>\n

The securities traded are financial like bonds, stock futures, or other financial instruments of value. The date when an order is placed is known as trade day whereas the transferring of security and cash takes place on the settlement day.<\/p>\n

The\u00a0trade settlement in the trade life cycle<\/a><\/strong>\u00a0process is a part of a bigger whole which we call the trade settlement period.<\/p>\n

The trade settlement period incorporates the whole time taken to complete the trade, starting from execution to settlement of the trade.<\/p>\n

Types of Trade Settlement\u00a0<\/strong><\/h2>\n

During trading of financial securities, the time period for settlement of trades, trade capture<\/strong> is set as per the contract. The general time frame differs as per the types of securities. Equity securities are settled on T + 2 days, here \u2018T\u2019 is the trade date. Other securities such as commodities, currencies, or derivatives are traded at the mark to market, the settlement for a mark to market is at T + 2 days.<\/p>\n

The classification of Trade settlement can be done into 3 types:<\/em><\/strong><\/p>\n