Settlement Lag

Settlement lag is the time delay between the execution of a trade and the final transfer of the underlying assets. In many traditional markets, this is represented by T+2 or T+1, meaning settlement occurs one or two days after the trade.

This delay introduces credit and market risk, as prices can change before the transaction is finalized. The push towards T+0 or instantaneous settlement is a major trend in the financial industry, driven by blockchain technology.

Reducing settlement lag lowers the capital requirements for participants and improves market efficiency. However, it also requires significant upgrades to existing infrastructure.

The ultimate goal is to eliminate lag entirely to minimize counterparty exposure.