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Settlement

Key Concepts

Introduction

After you trade an asset, the brokerage needs to settle the funds in your account. The most common type of settlement is immediate, where the funds are immediately available for trading after the transaction. In some cases, you may have delayed settlement, where you sell an asset and need to wait a few days to spend the cash you receive from the sale. A settlement model simulates these settlement rules.

Set Models

The brokerage model of your algorithm automatically sets the settlement model for each security, but you can override it. To manually set the settlement model of a security, call the set_settlement_model method on the Security object.

Select Language:
def initialize(self) -> None:
    security = self.add_equity("SPY")
    # Set a delayed settlement model that settles 7 days after the trade at 8 AM
    # This can better mimic actual settlement of some brokerage, providing more realistic fund and margin available
    security.set_settlement_model(DelayedSettlementModel(7, timedelta(hours=8)))

You can also set the settlement model in a security initializer. If your algorithm has a universe, use the security initializer technique. In order to initialize single security subscriptions with the security initializer, call set_security_initializer before you create the subscriptions.

Select Language:
class BrokerageModelExampleAlgorithm(QCAlgorithm):
    def initialize(self) -> None:
        # In the Initialize method, set the security initializer to seed initial the prices and models of assets.
        self.set_security_initializer(MySecurityInitializer(self.brokerage_model, FuncSecuritySeeder(self.get_last_known_prices)))

# Outside of the algorithm class
class MySecurityInitializer(BrokerageModelSecurityInitializer):

    def __init__(self, brokerage_model: IBrokerageModel, security_seeder: ISecuritySeeder) -> None:
        super().__init__(brokerage_model, security_seeder)    
    def initialize(self, security: Security) -> None:
        # First, call the superclass definition.
        # This method sets the reality models of each security using the default reality models of the brokerage model.
        super().initialize(security)

        # Next, overwrite some of the reality models
        security.set_settlement_model(DelayedSettlementModel(7, timedelta(hours=8)))

To view all the pre-built settlement models, see Supported Models.

Default Behavior

The brokerage model of your algorithm automatically sets the settlement model for each security. The default brokerage model is the DefaultBrokerageModel, which sets the settlement model based on the security type and your account type. The following table shows how it sets the settlement models:

Security TypeAccount TypeSettlement Model
EquityCashDelayedSettlementModel with the default settlement rules
OptionCashDelayedSettlementModel with the default settlement rules
FutureAnyFutureSettlementModel

For all other cases, the DefaultBrokerageModel uses the ImmediateSettlementModel.

The default delayed settlement rule for US Equity trades is T+2 at 8 AM Eastern Time (ET). For example, if you sell on Monday, the trade settles on Wednesday at 8 AM. The default delayed settlement rule for Future and Option contracts is T+1 at 8 AM.

Model Structure

Settlement models must extend the ISettlementModel interface. Extensions of the ISettlementModel interface must implement the scan and apply_funds methods. The scan method is automatically called at the top of each hour and it receives a ScanSettlementModelParameters object. The apply_funds method receives an ApplyFundsSettlementModelParameters object and applies the settlement rules. The apply_funds method is also automatically called, but its frequency depends on the security type. The apply_funds method is automatically called when you fill an order for the following security types:

  • Equity
  • Equity Options
  • Crypto
  • Forex
  • Future Options
  • Index Options

The apply_funds method is automatically called when you close a position for the following security types:

  • Futures
  • Crypto Futures
  • CFD
Select Language:
class CustomSettlementModelExampleAlgorithm(QCAlgorithm):
    def initialize(self) -> None:
        security = self.add_equity("SPY")
        # Set the custom settlement model of the selected security to reflect actual scenario for more realistic margin available
        security.set_settlement_model(MySettlementModel())

# Define the custom settlement model outside of the algorithm
class MySettlementModel:
    def apply_funds(self, applyFundsParameters: ApplyFundsSettlementModelParameters) -> None:
        currency = applyFundsParameters.cash_amount.currency
        amount = applyFundsParameters.cash_amount.amount
        applyFundsParameters.portfolio.cash_book[currency].add_amount(amount)

    def scan(self, settlementParameters: ScanSettlementModelParameters) -> None:
        pass
    
    def get_unsettled_cash(self) -> CashAmount:
        return CashAmount(0, 'USD')

For a full example algorithm, see this backtest.

ApplyFundsSettlementModelParameters objects have the following properties:

ScanSettlementModelParameters objects have the following properties:

You likely don't need to create a custom settlement model because the supported models already implement immediate and delayed settlement rules.

Examples

The following examples demonstrate some common practices for implementing the settlement model.

Example 1: 2-day Settlement

The following algorithm simulates Interactive Brokers cash account. According to IB's website, cash positions will be settled in 48 hours. Thus, we can implement DelayedSettlementModel to mimic that. We hold the intra-day position of SPY to implement the settlement logic.

Select Language:
# region imports
from AlgorithmImports import *
# endregion

class SettlementModelAlgorithm(QCAlgorithm):
    def initialize(self) -> None:
        self.set_start_date(2023, 10, 1)
        self.set_end_date(2024, 10, 1)
        
        # Simulate a cash account of IB.
        self.set_brokerage_model(BrokerageName.INTERACTIVE_BROKERS_BROKERAGE, AccountType.CASH)
        # We need to set the settlement model in the security initializer.
        self.set_security_initializer(CustomSecurityInitializer(self.brokerage_model, SecuritySeeder.NULL))

        # Request SPY data for trading.
        self.spy = self.add_equity("SPY").symbol

    def on_data(self, slice: Slice) -> None:
        # Trade based on updated data.
        bar = slice.bars.get(self.spy)
        if bar and not self.portfolio.invested:
            # Order based on the current available cash.
            quantity = (self.portfolio.cash - self.portfolio.unsettled_cash) // bar.close
            if quantity > 0:
                self.market_order(self.spy, quantity)
        
        # Exit position before market close; we only hold the intraday position.
        if slice.time.hour == 15 and slice.time.minute == 45:
            self.liquidate()

class CustomSecurityInitializer(BrokerageModelSecurityInitializer):
    def __init__(self, brokerage_model: IBrokerageModel, security_seeder: ISecuritySeeder):
        super().__init__(brokerage_model, security_seeder)
    def initialize(self, security: Security) -> None:
        super().initialize(security)
        # IB settles cash in 48 hours.
        security.set_settlement_model(DelayedSettlementModel(2, timedelta(hours=0)))

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