Updated on March 17, 2023
Settlement date is a day on which a trade or an options contract must be settled. It entails transferring the actual ownership of securities or stocks at the agreed price to the buyer. Whenever a security is bought or sold or when a trade happens, it is the day of record and is known as the ‘transaction date’. A transaction date is thus the date on which a transaction occurs.
Settlement date is the day on which the transaction is finalised or closed after the ownership of security is transferred to the buyer. Settlement does not happen on the same day the transaction happened and it takes time to actually deliver the security and settle its payment.
Settlement Date Explained
a) The ‘Settlement date’ means the transfer of shares/securities to the buyer’s account and cash to the seller’s account.
b) In India, stock exchanges currently follow the Trade plus 2 days or T+2 settlement system, which means that settlement of funds & securities happens two business days after the order is concluded/executed/fulfilled.
c) The settlement date is a working day for markets which means Saturdays, Sundays, bank and stock exchange holidays will not be included.
d) Settlement date will be a later date than the transaction date.