What are the usual settlement times for money market instruments?

• A. Next day only
• B. T+3
• C. Same day or following day
• D. T+2

Answer: (C)

Money market instruments are designed for very short-term liquidity, so they settle very quickly to minimize risk. The usual settlement times are either the same day the trade is agreed or the next business day. This rapid settlement supports instant cash management and reduces the window of credit or settlement risk, often facilitated by real-time settlement systems. Settling only on the next day or delaying settlement to longer periods (like a couple of days) would add unnecessary risk and reduce the near-cash nature of these instruments.