How Does the Settlement Process for a Security Token Differ from a Traditional Stock Trade?
Traditional stock trades typically settle in T+2 days (Trade date plus two business days) through a centralized clearing house. Security token trades, leveraging blockchain technology, can settle nearly instantaneously (T+0) and atomically (simultaneously exchanging the token and the payment).
This eliminates counterparty risk and the need for a central clearing house, drastically reducing settlement time and cost.
Glossar
Atomic Settlement
Execution ⎊ The simultaneous exchange of assets occurs only when all predefined conditions of a smart contract are met.
Capital Efficiency
Leverage ⎊ Capital efficiency, within cryptocurrency and derivatives, fundamentally represents the maximization of risk-adjusted returns relative to capital at risk, a metric increasingly vital given regulatory constraints and market volatility.
Central Securities Depository
Function ⎊ A Central Securities Depository (CSD) traditionally provides the core infrastructure for the holding and electronic transfer of securities, acting as the ultimate book-entry record keeper.