Transaction settlement is the process of transferring the ownership of a financial asset from the seller to the buyer, ensuring that the buyer has paid the seller and the seller has delivered the asset. It is a critical step in financial markets that involves various entities like clearinghouses and custodians to mitigate risks and ensure the integrity of the transaction.

Transaction Settlement

Transaction settlement

A financial asset is an intangible asset whose value is derived from a contractual claim, such as bank deposits, bonds, and stocks. These assets are typically more liquid than physical assets and are used by investors to generate income or capital gains.

financial asset

Ownership transfer refers to the legal process by which the rights, title, and interest in a property or asset are conveyed from one party to another. This process involves various legal, financial, and administrative steps to ensure that the transfer is valid, enforceable, and compliant with applicable laws and regulations.

Ownership Transfer

buyer

seller

Financial markets are platforms where individuals and institutions can trade financial securities, commodities, and other fungible items at prices that reflect supply and demand. They play a crucial role in the economy by facilitating liquidity, price discovery, and the efficient allocation of resources.

financial markets

Clearinghouses act as intermediaries between buyers and sellers in financial markets, ensuring the smooth processing of transactions by managing counterparty risk and guaranteeing trade completion. They play a crucial role in maintaining market stability and transparency by standardizing and validating trades, and by providing a mechanism for the netting and settlement of obligations.

clearinghouses

custodians

Risk mitigation involves implementing strategies to reduce the impact and likelihood of adverse events on an organization. It is a proactive approach that combines risk assessment, prioritization, and the deployment of risk control measures to safeguard assets and ensure business continuity.

CUSTOMIZE YOUR LEARNING

CUSTOMIZE YOUR LEARNING

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