What is settlement?

After shares are traded, an exchange takes place between investors on each side of the transaction.  A buyer provides funds to a seller who supplies shares in return.

Settlement is the term used to describe this exchange. It is one of the major services provided by the Australian Stock Exchange to facilitate the buying and selling of shares by investors.

Figure 1 below shows the relationship between ASX's Trading and Settlement services.


Figure 1 - Trading and Settlement services at ASX


In Stage 1, trading, ASX matches ‘buy’ and ‘sell’ orders placed by brokers on behalf of their clients.

After three days, these orders are then settled and transfer of title is affected.