Pre-Settlement Risk

Pre-Settlement Risk

The risk that a trade will not settle. For example, a buyer may not receive delivery of the securities he/she bought by the settlement date. A failure to deliver can occur because of the negligence or deliberate withholding on the part of the seller. If a buyer does not receive the securities, he/she is not obligated to make payment until delivery is made, but it renders him/her unable to resell or conduct other activities that would advance his/her investment goals.
References in periodicals archive ?
The move to T+2 significantly reduces pre-settlement risk by eradicating 24 hours of risk exposure between the time when a trade is executed and the time when assets are exchanged.
Fiduciary services to be provided include: -- Administration of all Petros investment funds, managed on a segregated basis by 17 third-party fund managers; -- Risk analysis for fixed income and equity funds, including daily value at risk calculations and stress testing; -- Daily pre-settlement risk monitoring and compliance to ensure the trades in the segregated funds comply with pre-determined parameters, including risk control and analysis, legal compliance and credit ratings; and -- Price settlement bands for illiquid assets, in order to avoid mispriced transactions, based on a proprietary pricing methodology.
The merger, which the three respective boards will recommend to their shareholders, will create a single industry facility for the reduction of settlement and pre-settlement risk in the foreign exchange market, in accordance with recommendations of the "Group of Ten" central banks.