The practice of settling a trade before the usual settlement date. This is fairly unusual; most contracts are settled between one and three days later. Generally speaking, early settlement is common in the last week of the calendar year when many trades must be settled sooner to guarantee tax advantages for one or both parties. Likewise, one may desire early settlement for other reasons, such as to receive a dividend on a certain date. See also: Cash contract.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
The transfer of a security or cash on a date prior to the usual settlement date. A buyer of stock may prefer an early settlement in order to be listed on a firm's books on the record date for a dividend. The buyer of a municipal bond may desire an early settlement in order to begin earning tax-free interest on an earlier date.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.