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Settlement latency Meaning

Settlement latency is the time delay between when a trade is "Executed" (agreed upon) and when it is "Settled" (the legal ownership and money actually move). In traditional markets, this is often expressed as T+2 (Trade date plus two business days).

In the crypto world, settlement latency is measured in block times, ranging from seconds to minutes.This delay is a massive "Efficiency Tax" on the global economy. During the latency period, capital is "Trapped" and cannot be used for other purposes.

Furthermore, the longer the latency, the higher the risk that one of the parties could go bankrupt or the market could move so much that the trade becomes "Uncollateralized." This is why there is a global push to move from T+2 to T+0 (Real-time Settlement), a goal that is naturally achieved by blockchain technology.However, in crypto, there is a distinction between "Probabilistic Finality" and "Economic Finality." On Bitcoin, a transaction is "Settled" in 10 minutes, but most users wait for 6 blocks (60 minutes) to be "Sure" it won't be reversed by a chain reorganization. On newer chains like Solana or Avalanche, settlement latency is less than 2 seconds.

Reducing this latency to the absolute limit is the primary goal of "High-Frequency" DeFi protocols, as it allows for more efficient "Capital Utilization" and lower risk for market makers.

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Important Disclaimer:

Finery Markets BVI Limited (“Finery Markets”) provides software, technology infrastructure, and related Information and Communication Technology (ICT) services on a Software-as-a-Service (“SaaS”) basis. Finery Markets acts solely as a software vendor and does not operate a trading platform, does not intermediate, match, execute, clear, or settle transactions, and does not engage in any activities that would require regulatory authorisation under applicable laws.

Finery Markets’ software is non-custodial and is provided exclusively to licensed institutional entities that act as independent operators of their own environments. All counterparties are solely responsible for establishing and maintaining their own bilateral trading and settlement relationships. Finery Markets is not a party to any such arrangements and assumes no responsibility for the conduct, verification, or compliance obligations of any users of the software.

Nothing on this website shall be construed as a financial promotion, investment advice, or an offer to engage in regulated activities. Access to and use of the software is strictly limited to clients who have entered into a software licensing agreement with Finery Markets. Persons located in jurisdictions where such access is restricted should not rely on this website or any of its contents.

Additional notice to UK visitors: This website and associated communications are not intended to constitute a financial promotion under The Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) and related guidance. Access to services provided by Finery Markets is limited to regulated entities, professional clients and eligible counterparties as set out by the Financial Conduct Authority. UK users are not permitted to use this website for the services of Finery Markets if they don't fall within these categories.