In the stock market, Settlement refers to the process of completing a transaction and transferring ownership of a security from the seller to the buyer. When a trade is made, the buyer agrees to purchase a certain number of shares at a certain price, and the seller agrees to sell those shares at that price.In the stock market, settlement typically occurs on the second business day after the trade, which is known as the settlement date or trade date + 2 days (T+2). This is known as regular way settlement. In some markets, like US, the settlement date is T+3. During this time, the buyer's broker will transfer the funds for the shares to the seller's broker, and the seller's broker will transfer the shares to the buyer's broker. The buyer's broker will then credit the shares to the buyer's account, and the seller's broker will credit the funds to the seller's account.It's important to note that when a trade is made, the buyer must have sufficient funds or securities in their account to cover the purchase. If the buyer does not have the necessary funds or securities, the trade will not settle and the stock will not be transferred to the buyer's account.In some cases, when a trade is made, the seller may not have the shares in their possession. In these cases, the seller may borrow shares from another investor in order to make the sale, which is known as a short sale.
