Welcome to Settlement, the process that turns an agreed securities trade into completed delivery and payment, while providing procedures for trades and delivery obligations that do not settle as expected.
Exam Weight: 3 of 35 in Function 1 (6% of exam)
What You'll Learn
In this unit, you'll cover:
- Trade comparison and settlement arrangements: Matching trade details before settlement and recognizing the organizations that provide settlement services.
- Delivery versus payment settlement: Linking a securities delivery to its payment.
- Repurchase agreements, resale trades, and continuous net settlement: Handling linked transactions and netted obligations.
- Settlement exceptions: Identifying don't know trades, aged fails, buy-ins, and close-outs.
- Regulation SHO close-outs: Applying the required timing for an equity-security fail to deliver.
Why This Matters
Settlement operations depend on sequence. Trade details must match before securities and money can move; when a delivery fails, the firm needs a process to identify the problem and resolve it. Series 99 questions often test the distinction between a matching step, a net obligation, and the procedure that cures a fail.
Let's start with trade comparison, the check that comes before settlement.