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.