What is settlement?

Settlement refers to the process by which a buyer and seller complete their trade of securities (like stocks, bonds, or ETFs). It involves the exchange of the securities for money between the two parties, ensuring that legal ownership of the security is transferred to the buyer and that the seller receives the agreed-upon payment.

The settlement period is the time between the trade date (when the order is executed) and the settlement date (when the transaction is finalized). For most stocks, bonds, and ETFs, this period is typically T+2 - which means two business days after the trade is executed. During this time, both buyer and seller need to ensure that the necessary money or securities are available to complete the transaction.