What is the main purpose of trade settlements in currency transactions?

The main purpose of trade settlements in currency transactions is to ensure accurate and efficient settlement between parties. This refers to the systematic process of completing a transaction where both parties fulfill their obligations, typically involving the exchange of currency and possibly other financial instruments.

Efficient settlements help prevent discrepancies and reduce the risks of errors that could occur if transactions were not properly managed. By streamlining the settlement process, trade settlements contribute to the overall integrity and reliability of the trading system. They are crucial for maintaining trust in financial markets, as timely and accurate settlements enable participants to proceed with confidence in their trading activities.

This characteristic distinguishes settlements from other potential purposes, such as delaying payments for strategic benefits or maximizing revenue for intermediaries, which are not the primary focus or intention of settlement processes. Standardizing exchange rates across markets is also a separate function that does not directly pertain to the settlement process itself.