Mechanism library · English
How settlement works
What happens between a filled trade and the money and shares actually changing hands — the clearing mechanism behind every trade.
A fill is a promise, not a transfer
When your order fills, the trade is recorded but nothing has moved yet. The exchange's clearing corporation steps between the buyer and the seller, becoming the counterparty to both, and settles the obligations afterwards: the seller's shares must arrive, the buyer's money must arrive, and only then do the two legs complete. You never depend on the person on the other side keeping their word — you depend on the clearing corporation, which is what it exists for.
Cash and securities move on the settlement calendar, not when the fill prints.
| Leg | When it is done |
|---|---|
| Trade date (T) | The fill is recorded |
| T+1 | Funds and securities are intended to settle for equity cash |
| Corporate action record date | Who is on the register — independent of T+1 |
The cycle
Indian equity trades settle on a compressed cycle: for most equities the shares and money move shortly after the trade date itself. The exact cycle is set by the exchanges and changes over time; what does not change is the shape — a defined window in which the obligations created at the fill must be met, with penalties for the side that does not meet them. Shortened cycles mean less time for anything to go wrong between the promise and the transfer, and tighter discipline for everyone in the chain.
Why settlement failures are rare and serious
The clearing corporation holds margins from both sides precisely so that a failure to deliver does not become a failure of the market. A seller who cannot deliver faces an auction for the shares and bears the cost; the buyer still receives what was bought. The mechanism is deliberately boring: boring is what makes it work every single day.