Settlement Currency

A trade's settlement currency determines which holiday calendar its settlement-day calculations are measured against – see Business Centre for how a calendar is named via a business centre code in the first place, and Date Rolling and Business-Day Calendars for how a calculated date that falls on a non-business day for that calendar is rolled to a valid one. For a currency pair specifically, FX spot date and settlement documents the further nuance that a settlement day narrows business day to also exclude USD holidays – USD holidays being conventionally treated as ordinary business days for most purposes but still blocking settlement – and how fixing-date and settlement-date calendars can genuinely differ for non-deliverable instruments.

For a cash-settled instrument, settlement currency is also, directly, the currency in which the settlement payment is made: rather than delivering the underlying, the two counterparties exchange a single payment in the agreed settlement currency reflecting the instrument's value. The non-deliverable forward is the clearest widely-documented example of this role: USD is, in practice, the most common settlement currency for the net cash payment an NDF uses in place of physical delivery of a restricted currency. This is the same distinction FX deliverability and NDFs draws at the currency-pair level between a deliverable pair (physical exchange of both currencies) and a non-deliverable forward (a single net cash settlement in a third, freely-convertible currency) – settlement currency is the field that carries that choice at the level of an individual trade.