Continuous net settlement

In continuous net settlement, most securities transactions are finalized, or cleared and settled, within a brokerage firm.

The firm's clients' orders to buy and sell are offset, or matched against each other, so that at the end of the trading day only those positions that haven't been offset internally remain to be settled.

In a simplified example, all the shares of Stock A that a firm's clients bought are netted against all of the shares that its clients sold by reallocating ownership on the firm's books. Payment is handled in a similar fashion, as money is transferred from the buyers' account to the sellers'.

If the firm has more buys than sells or the other way around, as is likely, it either delivers shares or receives them and makes a payment or receives it.

Clearing and settlement for transactions that aren't offset are handled by an automated system through two branches of the Depository Trust & Clearing Corporation (DTCC), the National Securities Clearing Corporation (NSCC), and the Depository Trust Company (DTC).