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Simple English definitions for legal terms
settlement date
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A quick definition of settlement date:
A settlement date is the day when something is supposed to happen or when something is finalized. It can refer to the date when an event occurred or will occur, like a trial or appointment. It can also refer to specific dates in different areas of law, such as the date of injury in torts or the date of bankruptcy adjudication. In securities, it refers to the date when an investor must pay for securities purchased or when a seller must deliver negotiable certificates for securities sold.
A more thorough explanation:
Definition: The date on which an investor must pay the broker for securities purchased or a seller must deliver negotiable certificates for securities sold.
Example: If an investor buys stocks on Monday, the settlement date may be on Wednesday. This means that the investor must pay the broker for the stocks purchased on Wednesday.
Explanation: The settlement date is important in securities trading because it determines when the buyer must pay for the securities and when the seller must deliver them. It is usually two business days after the trade date. In the example given, the settlement date is two days after the purchase date, which is on Wednesday. This ensures that both parties fulfill their obligations in a timely manner.