Settlement (finance) in the context of "CUSIP"

The spot market or cash market is a public financial market in which financial instruments or commodities are traded for immediate delivery. It contrasts with a futures market, in which delivery is due at a later date. In a spot market, settlement normally happens in T+2 working days, i.e., delivery of cash and commodity must be done after two working days of the trade date. A spot market can be through an exchange or over-the-counter (OTC). Spot markets can operate wherever the infrastructure exists to conduct the transaction.

The Good Delivery specification is a set of rules issued by the London Bullion Market Association (LBMA) describing the physical characteristics of gold and silver bars used in settlement in the wholesale London bullion market. It also puts forth requirements for listing on the LBMA Good Delivery List of approved refineries.

Good Delivery bars are notable for their large size and high purity.

In finance, a spot contract, spot transaction, or simply spot, is a contract of buying or selling a commodity, security or currency for immediate settlement (payment and delivery) on the spot date, which is normally two business days after the trade date. The settlement price (or rate) is called spot price (or spot rate). A spot contract is in contrast with a forward contract or futures contract where contract terms are agreed now but delivery and payment will occur at a future date.

A central clearing counterparty (CCP), also referred to as a central counterparty, is a financial market infrastructure organization that takes on counterparty credit risk between parties to a transaction and provides clearing and settlement services for trades in foreign exchange, securities, options, and derivative contracts. CCPs are highly regulated institutions that specialize in managing counterparty credit risk. An extensive overview of the academic literature can be found in Berndsen (2021).

CCPs "mutualize" (share among their members) counterparty credit risk in the markets in which they operate. A CCP reduces the settlement risks by netting offsetting transactions between multiple counterparties, by requiring collateral deposits (also called "margin deposits"), by providing independent valuation of trades and collateral, by monitoring the creditworthiness of the member firms, and in many cases, by providing a guarantee fund that can be used to cover losses that exceed a defaulting member's collateral on deposit. CCPs require a pre-set amount of collateral — referred to as ‘initial margin’ — to be posted to the CCP by each party in a transaction. The first line of defense is collateral provided by the defaulting member. CCPs typically adjust initial margin demands in response to changes in market conditions. For instance, a CCP may increase initial margin requirements in response to high price volatility. Variation margin is the second line of defense against fluctuation in the prices of securities pledged as collateral. If those prices fall, the member must deposit a corresponding amount of cash, and if those prices go up, the member may withdraw a corresponding amount of cash. This is done either on a daily basis or sometimes more frequently. For some financial products, members’ net payment obligations to or from the CCP are settled on a daily basis (or more frequently if there are large movements during the course of the day) to prevent the build-up of large exposures. The advantages of a central counterparty clearing arrangement are greater transparency of the risks, reduced processing costs, and greater certainty in cases of default by a member.Once a trade has been executed by two counterparties, it is submitted to a clearing house, which then steps between the two original traders' clearing firms and assumes the legal counterparty risk for the trade. For example, a trade between member firm A and firm B becomes two trades: A-CCP and CCP-B. This process is called novation.

A central securities depository (CSD) is a specialized financial market infrastructure organization holding securities such as shares or bonds, either in certificated or uncertificated (dematerialized) form, allowing ownership to be easily transferred through a book entry rather than by a transfer of physical certificates. This allows brokers and financial companies to hold their securities at one location where they can be available for clearing and settlement. In recent decades this has usually been done electronically, making it much faster and easier than was traditionally the case where physical certificates had to be exchanged after a trade had been completed.

In some cases these organizations also carry out centralized comparison and transaction processing such as clearing and settlement of securities transfers, securities pledges, and securities freezes.

In banking and finance, clearing refers to all activities from the time a commitment is made for a transaction until it is settled. This process turns the promise of payment (for example, in the form of a cheque or electronic payment request) into the actual movement of money from one account to another. Clearing houses were formed to facilitate such transactions among banks.

An International Securities Identification Number (ISIN) is a code that uniquely identifies a security globally for the purposes of facilitating clearing, reporting and settlement of trades. Its structure is defined in ISO 6166. The ISIN code is a 12-character alphanumeric code that serves for uniform identification of a security through normalization of the assigned National Number, where one exists, at trading and settlement.

Financial market infrastructure refers to systems and entities involved in clearing, settlement, and the recording of payments, securities, derivatives, and other financial transactions. Depending on context, financial market infrastructure may refer to the category in general, or to individual companies or entities (thus also used in plural: financial market infrastructures).