In finance, settlement refers to the final step in the transfer of ownership of securities for payment. Through the settlement process, the buyer and the seller exchange payment for a set quantity of securities at an agreed upon price, therefore fulfilling their contractual obligations. After settlement, all parties’ obligations are discharged, and the transaction is considered complete.
But that will change soon. Effective May 27, 2024, the markets in Canada and Mexico will shorten the settlement cycle for most securities from two business days after a trade to one business day following a trade . U.S. markets will move to T+1 settlement on May 28, 2024. Other settlement terms Although this change will affect the vast majority of securities traded in the North American financial markets, it’s good to remember that there are other settlement cycles that will remain unaffected by this change.Some securities can take a lot longer to settle, for example. This is more commonly found in structured products like private equity funds, which can take one week, one month, or even one quarter to settle.