🔄 Clearing and Settlement
📚 US Capital Private Bank Knowledge Base
📖 Definition
Clearing and Settlement refer to the processes that finalize a securities transaction. Clearing involves the confirmation and matching of trade details, while settlement is the actual exchange of securities and payment between buyer and seller.
⚙️ How It Works
Once a trade is executed, clearinghouses act as intermediaries to confirm trade details, manage counterparty risk, and prepare for settlement. Settlement occurs when the buyer receives the securities and the seller receives payment, typically within a standard settlement cycle (e.g., T+2, meaning trade date plus two business days).
📝 Key Features
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🤝 Trade Confirmation: Ensures both parties agree on trade terms.
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🛡️ Risk Management: Clearinghouses guarantee settlement, reducing counterparty risk.
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💵 Settlement Cycle: Standardized time frame to complete transactions.
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🔄 Delivery vs Payment (DvP): Simultaneous exchange of securities and funds to prevent default.
✅ Benefits
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Increases market stability and confidence.
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Reduces settlement risk and fraud.
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Ensures timely and accurate transfer of assets and funds.
⚠️ Risks & Considerations
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Settlement failures can lead to financial losses.
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Delays impact liquidity and market efficiency.
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Requires robust infrastructure and regulation.
🔎 Related Terms
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🏦 Clearinghouse
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⏳ Settlement Cycle
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⚠️ Counterparty Risk
📚 References
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📄 Securities and Exchange Commission (SEC) – Clearing and Settlement Overview
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🌐 Federal Reserve – Settlement Systems
📞 Contact US Capital Private Bank
📧 Email: [email protected]
🌐 Website: https://uscapitalprivatebank.com