Settlement date

The settlement date is the day a trade is actually performed: the buyer becomes the owner of the securities through an entry in the registry system, and the seller receives the money. Concluding a trade on the trading system only creates an obligation between the parties, and that obligation stays unfulfilled until settlement day arrives. Every exchange trade therefore has two different dates: the day the parties agreed on the price, and the day the exchange of assets took place.

Where the settlement period comes from

The settlement period is set by the trading mode in which the trade was concluded, not by agreement between the parties. The main equity trading mode on the Russian market uses deferred settlement: securities and money change hands not on the trade date but on the next business day under the settlement calendar. In certain modes bonds settle on the trade date itself, while negotiated and over-the-counter contracts may specify their own period. Between the two dates, clearing takes place: it nets the participants' offsetting obligations and determines the final amounts and quantities, and only after that does the depository make the entries on the custody accounts. Weekends and public holidays do not count, so a trade made just before a long holiday settles later than counting calendar days would suggest. The settlement currency is specified separately: an obligation may be denominated in roubles or another currency, and this determines the currency in which funds are debited.

Example: record dates and the delivery period

The right to a payout goes to whoever is listed as the owner on the date set for compiling the shareholder register, and an investor appears on that list as a result of settlement, not of when the trade was made. Hence the rule: to make it onto the list, the purchase has to be made in advance, allowing for the settlement period. The upcoming record dates for Russian securities:

Count back from each of these dates, taking the trading mode into account. The mechanism is covered in more detail under record date and dividend cut-off.

Where the term is misunderstood

The most common mix-up is taking the settlement date to be the day the money appears in the brokerage account in the app. A broker may display the result before the trade has actually been performed or, conversely, credit it with a delay caused by its internal accounting. The second mistake is applying the familiar period to every instrument at once: futures settlement and delivery follow a different logic, and fund units and over-the-counter securities have periods of their own. Finally, when a security is sold the day before the register is compiled, the right to the payout stays with the seller if the transfer of title took place after the set date — something the trade screen does not show.