SIE Understanding Trading, Customer Accounts and Prohibited Activities Question 45: Answer and Explanation

Question: 45

Which of the following statements correctly defines trade settlement?

• A. Trade settlement refers to the time in business days between the date the trade is agreed to, until the seller's broker-dealer receives payment and the buyer's broker-dealer receives ownership.
• B. Trade settlement refers to the time in business days during which a security is held.
• C. Trade settlement refers to the time in calendar days between the declaration date for stock dividends and the ex-dividend date.
• D. Trade settlement refers to the time in calendar days between the first trade for which an investor places a market order and the confirmation of the order's execution is reported to the investor's broker-dealer.

Correct Answer: A

Explanation:

A: Choice A is correct because this measures the time necessary to complete an agreed transaction. Trade settlement schedules are specified by some rules. Choices B, C, and D are incorrect.