The settlement process refers to the completion of a PSE trade effected by the delivery and payment of the securities on settlement date. For traditional stockbrokers, settlement of all transactions, either buying or selling is done after two (2) trading days from the transaction date or T+2. This means that the buyer must pay for the costs of the transaction to his stockbroker within two (2) trading days after the trade was done. Similarly, the seller will receive the proceeds of the sale from the stockbroker after the second day from the transaction date.
As such, cleared funds must be deposited in the clearing member’s cash settlement account in the settlement bank and securities must be made available in the clearing member’s securities accounts in the central depository’s system not later than 12:00 noon of settlement date. If securities are not delivered by the selling clearing member, the clearing house will not release the corresponding cash entitlement to him, and vice versa. Late deliveries are imposed a monetary fine/penalty by the clearing house.
Image 1. Settlement Period
For online stockbrokers, settlement of all transactions is done on the transaction date. To buy shares of stock, you will need to fund your account prior to any purchase. In the same manner, the proceeds of your sale will be credited to your account not later than two (2) working days from the transaction date.