ETF Dictionary

Settlement day

Explanation of Settlement Day

What is Settlement Day?

1. What is Settlement Day?

According to VSD, The day when buyers or sellers receive securities or cash in the clearing and settlement process for securities or ETFs traded on stock exchanges
. It marks the finalization of a financial transaction, typically occurring about 2 business days after the trade date, ensuring the receipt of the buyer’s payment, and facilitating the seller’s delivery.
In Vietnam, The common period is about 2 business days after the trade date. For instance, if you buy or sell a stock on Monday (the trade date), the process will occur on Wednesday afternoon (T+2).
For government bonds, the period could be T+1 and the future trading will be T+0.

In securities trading, ‘T’ is the “Transaction” date, the terms T+0, T+1, and T+2 denote specific days in the trading and settlement process. Here’s an explanation of each:

	Trade Date	Definition
	T+0	Refers to the day when the securities transaction is executed.
	T+1	Refers to 1 day after the securities transaction occurs.
	T+2	The day when ETFs and securities are transferred to the buyer’s account, ensuring timely receipt of securities and payment for the buyer and seller, respectively.

In Vietnam, both stocks and ETFs follow a T+2 settlement process, allowing for afternoon trading and enhancing efficiency in trading and portfolio management. If T+1, T+2, or T+3 fall on a non-business day, customers must wait for 1, 2, or 3 consecutive business days for settlement.
These terms are essential for understanding the timeline of a securities transaction, detailing steps like confirmation, actual transfer, and formal settlement.

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