Series 7 practice questionmediumTrade Settlement — Cash Settlement
A customer requests a cash settlement for a stock trade executed on Tuesday. When must settlement occur?
- ABy end of business on Tuesday (same day)✓ Correct answer
- BBy end of business on Wednesday
- CBy end of business on Thursday
- DWithin 5 business days
Explanation
Why A — By end of business on Tuesday (same day)
A cash settlement requires delivery and payment on the same day as the trade (T+0). Cash settlement trades must be completed by the end of business on the trade date. This type of settlement is uncommon and typically used in special circumstances, such as when an investor needs to meet a specific deadline. Cash settlement trades often carry a premium because the seller must deliver securities on the same day.
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