Question : Case Study 73
RST Inc. is a technology startup aiming to raise funds for its research and development projects. The company's management is considering the trading procedures on a stock exchange.
Question :
What is the term used to describe the process of transferring ownership of securities from a seller to a buyer?
Option 1: Placing an order
Option 2: Execution of the order
Option 3: Settlement
Option 4: Dematerialization
Correct Answer: Settlement
Solution : The correct answer is (c) Settlement
The term used to describe the process of transferring ownership of securities from a seller to a buyer is "settlement." In the context of stock trading, after the buy and sell orders have been matched and executed (which is the "execution of the order"), the process of settling the trade involves transferring the ownership of the securities and the funds between the parties involved. It includes the confirmation, verification, and actual transfer of the securities and payment. This ensures that the buyer receives the securities they purchased and the seller receives the funds for the sale.
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