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The act of completing the trade required in a contract to pay for or deliver goods, securities, or currency. Because of the documentation involved, and postal and clerical delays, many bargains are not carried out immediately, but some time is allowed. This may take the form of having a set date for completion of all contracts made during a given period, or of ‘rolling settlement’, where each bargain is allowed a number of days for settlement. Prompt and reliable settlement is a major attraction of goods and securities markets. Failure to settle by a major financial institution could trigger a chain reaction of failures among other firms; one of the major reasons for financial regulation is to prevent this from happening.

Subjects: Economics.

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