What does 'X' settlement or cash settlement mean in trading?
In the trading world, “settlement” refers to the process of transferring securities from seller to buyer after a trade. Most trades settle with the delivery of actual shares. But in some cases, such as failure of delivery, an 'X' or cash settlement may occur instead.
What is 'X' settlement?
Also known as cash settlement, this occurs when the actual delivery of securities is not possible. Instead of receiving the shares, the buyer is compensated in cash equivalent to the value of the undelivered shares.
How it works
- The standard settlement cycle (T+1) expects shares to be delivered to the buyer’s Demat account the next trading day
- If delivery fails, and internal adjustment isn’t feasible, cash is paid to the buyer as compensation
Internal settlement
- When a buyer and a seller are both clients of the same broker, internal transfer of shares is possible
Example:
- Mr. X sells 21 shares of HDFC Ltd.
- Mr. Y buys 17, and Mr. Z buys 4
- FYERS internally settles Mr. X’s shares to Mr. Y and Mr. Z
Cash settlement example
- Ms. L buys 20 shares of MRF Ltd. on FYERS
- If the shares are not delivered to her on T+1 day and there’s no internal match
- FYERS initiates a cash settlement, paying her the value of the shares instead of delivering them
Cash settlement only occurs in rare delivery failure scenarios. It ensures the buyer isn’t left uncompensated when shares aren’t received.
What if...
| Scenario | Outcome |
|---|
| My shares aren’t delivered by T+1 | You may receive cash settlement instead. |
| Internal settlement is possible | FYERS transfers the shares directly without exchange involvement. |
| I don’t see shares in my Demat account | Check for messages or compensation under cash settlement. |
Last updated: 24 Jun 2025
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