What is Settlement?
Settlement is the process that occurs after you place a trade to buy or sell an investment. It’s the final step where the ownership of the asset is officially transferred, and the payment is completed.
When you buy an investment:
- Your money is transferred to the seller.
- You receive the shares in return.
When you sell an investment:
- The shares are transferred out of your account.
- You receive the cash once the sale is settled.
Until the settlement is complete, the transaction is considered "pending."
How Long Does Settlement Take?
In the UK and most global markets, the standard settlement period is T+2. This means:
- T = the trade date
- +2 = two working days after the trade date
So, if you make a trade on a Monday, the settlement will complete on Wednesday, provided there are no public holidays in between.
Why is Settlement Important?
You won’t be able to:
- Withdraw funds from a sale until the settlement completes.
- Use the proceeds from a sale to make another investment until the settlement is done.
It ensures that the trade is legally and financially finalised before the money or shares are reused.