8

Step 8Settlement

In settlement, the instrument involved in the execution in Step 4 is exchanged for the funds agreed in the transaction (see Figure 4.8). As noted, the exchange frequently takes place at a clearing corporation but can occur in any forum that is established either by custom in the market or that the parties agree upon. Although any arrangement can be negotiated, most markets standardize the process as much as possible to reduce costs and to avoid possible problems.

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Figure 4.8 Step 8: Settlement is the established procedure for exchanging payment from the buyer for ownership from the seller at a place and in a manner established ...

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