Settlement

The process of transferring securities from seller to buyer and cash from buyer to seller after a trade is executed. U.S. equities currently settle on a T+1 basis (one business day after the trade date), shortened from T+2 in May 2024. Settlement risk -- the possibility that one party fails to deliver -- is managed by clearinghouses like the DTCC. The move to shorter settlement cycles reduces counterparty risk but requires more efficient back-office operations.