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Stock Settlement – Trade date + 3 days. Options Settlement – Trade Date + 1 day.

Standard settlement periods for most currencies is 2 business days, with some pairs such as CAD/USD settling next business day. In order for a date to be a valid settlement date for an FX transaction, the central banks for both currencies must be open for settlements.

As an example of cross-currency settlement risk, consider a U.S. bank that purchases 10 million euros in the spot market at the exchange rate of EUR 1 = USD 1.12. This means that at settlement, the U.S. bank will remit US$11.2 million and, in exchange, will receive 10 million euros from the counterparty to this trade.

FX settlement risk is the risk that one party in a foreign exchange trade pays out the currency it sold but does not receive the currency it bought.

Standard settlement periods for most currencies is 2 business days, with some pairs such as CAD/USD settling next business day. In order for a date to be a valid settlement date for an FX transaction, the central banks for both currencies must be open for settlements.

As an example of cross-currency settlement risk, consider a U.S. bank that purchases 10 million euros in the spot market at the exchange rate of EUR 1 = USD 1.12. This means that at settlement, the U.S. bank will remit US$11.2 million and, in exchange, will receive 10 million euros from the counterparty to this trade.

Currency forward settlement can either be on a cash or a delivery basis, provided that the option is mutually acceptable and has been specified beforehand in the contract. Currency forwards are over-the-counter (OTC) instruments, as they do not trade on a centralized exchange, and are also known as “outright forwards.”

Standard settlement periods for most currencies is 2 business days, with some pairs such as CAD/USD settling next business day. In order for a date to be a valid settlement date for an FX transaction, the central banks for both currencies must be open for settlements.