SIE: 8.4.6. Clearance And Settlement

8.4.6.  Clearance and Settlement

Recall that a trade is cleared when the two sides of the trade are compared to make sure that they match. If the trade occurs on an exchange, the trade will be cleared through a clearinghouse, and the clearinghouse will become the counterparty to the trade. A counterparty is the other side of a transaction. Settlement occurs when the buyer receives the purchased securities and the seller receives payment for the securities.

Recall that for many securities transactions, regular way settlement occurs two business days after the trade date (T + 2). A trade is considered completed (confirmed) on the settlement date. Regular way settlement for U.S. Treasuries and option trades is one business day after the trade date (T+1).