Trading at settlement

38 Pages Posted: 26 Jan 2022 Last revised: 5 Aug 2022

See all articles by Søren Bundgaard Brøgger

Søren Bundgaard Brøgger

Copenhagen Business School

Jakob Ahm Sørensen

Copenhagen Business School - Department of Finance

Date Written: August 5, 2022


We study trading at settlement (TAS) in which orders are priced at a differential to the not-yet-known daily settlement price. In our model, TAS mitigates adverse selection for patient liquidity traders by “cream-skimming” uninformed order flow. Consistent with the model's key predictions, we find that (i) TAS volume correlates positively with uninformed demand; (ii) the distribution of TAS prices is tightly centered around zero; (iii) the TAS market is deeper than the regular market; (iv) liquidity in the regular market is low when the TAS market share is high; and (v) TAS orders placed early in the day have no impact on the daily settlement price, whereas TAS orders placed during the settlement window have a significant impact. Our results point to adverse selection as the main driver of trading costs.

Suggested Citation

Brøgger, Søren Bundgaard and Sørensen, Jakob Ahm, Trading at settlement (August 5, 2022). Available at SSRN: or

Søren Bundgaard Brøgger (Contact Author)

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000

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Jakob Ahm Sørensen

Copenhagen Business School - Department of Finance ( email )

Solbjerg Plads 3, SOL/A4.17
Copenhagen, Frederiksberg 2000

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