Clearing & Settlement
The post-trade process of matching, guaranteeing, and completing transactions; regular-way settlement for stocks, corporate bonds, and municipal bonds is T+1 — one business day after the trade.
Expect questions that hand you a trade date and ask when settlement occurs, or that swap “clearing” and “settlement” to see if you know clearing is the matching-and-guaranteeing step while settlement is the final exchange of cash for securities. The tell is counting business days, not calendar days — a Friday regular-way stock trade settles the next business day, Monday, and intervening weekends and holidays never count. Watch for the trap where an answer choice quotes T+2 (the pre-May-28-2024 cycle that some older question banks still show) or confuses regular-way with cash settlement, which settles same-day (T+0) and is used when a seller needs immediate proceeds.
Don’t confuse the players: NSCC clears and guarantees trades by stepping in as central counterparty, while DTC holds the securities in book-entry form and moves them at settlement. Keep this separate from the related terms — market makers and broker-dealers execute trades, the secondary market is where they happen, and clearing and settlement is what finishes them. Memory hook: “clear, then settle” mirrors the real order — match first, pay last.
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