Cash Settlement Question

I understand that cash settlement on stock trades is same day settlement. My question is when does an investor actually use the cash settlement option? How is this carried out? Is it as simple as calling my broker and asking to purchase a security using available cash in my account?

Say, if I missed purchasing the security in time to receive the dividend, then I could give my broker a call on the record date and ask if they would use cash settlement?


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Hi @Gray - great question!

In my experience, cash settlement is typically not available to most clients. In fact, I never handled one cash settlement trade while working in the industry. However, I only worked directly with retail clients, and I assume this function is only available to institutions.

Here’s a good snippet from the DTCC on cash settlement (T+0) trades. Other than what’s offered here and knowing the system exists for the exam, there’s not much else I can offer regarding the system. I hope this helps!