Settlement Date

The settlement date refers to the date on which a transaction is due for completion. In the securities markets, there is usually a period between the date the trade date and the settlement date, that is the day when the purchaser pays the cash for the purchased asset.

The period between the trade and the settlement date varies depending on the security and the rules of the market. Stocks and bonds purchases, for instance, settle two business days after the trade date, which is annotated as T+2. Government bonds settle on the next working day (T+1), while foreign currency spot trades settle 2 days after the trade date.

Forward currency transactions can have any settlement date later than the date of the spot transaction, from several days to months or years, although, normally the credit lines offered by liquidity providers are limited to one year.