Purchase The Structured Settlements: Security Settlements

Purchase The Structured Settlements

Settlement of securities is the process by which securities or interests in securities are delivered, usually in the simultaneous exchange of money. This happens in order to be able to meet obligations that have been placed in a contract arising under the securities trade. Settlement involves the prompt delivery of securities and payment as part of performance on the delivery obligations of the trade.

As in any business deal, a number of risks may come into play for the parties involved during the settlement. These risks are managed by the process of clearing which comes after trading and before settlement. It involves the modifying of the contractual obligations in order to facilitate settlement, often through the process of netting and novation.

The traditional methods used in security settlements involved the physical movement of paper instruments or certificates. Payments were made by paper cheque upon the receiving of a receipt by the registrar or an agent responsible for the transfer. This physicality of the security settlement still exits in the modern markets where it mostly applies for private or unregistered securities as opposed to that of publicly exchanged securities. This traditional method involves higher risks as one may appear for the settlement with fake certificates.

The electronic security settlement system came about mainly because of the systems of clearance and settlements in the world's security markets. In an electronic settlement system, settlement is done between the participants electronically. If a non party wishes to settle its interests, it must go about doing so through a custodian who is a participant. Their interests are recorded by entries known as credit entries. This is done in the securities accounts that are maintained by the operator of the system in their names. This permits for the quick and efficient settlement and completely removing the need of papers. This modern electronic method is less risky and fast.

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