Financial market infrastructure.
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Your money is mostly numbers in a bank’s ledger. When you pay somebody, say at a shop, through some way other than cash, somebody needs to confirm that you, the payor, have the money to give to the person receiving the payment, the payee, then reduce the numbers in your account, and increase the number in the payee’s account, and inform the payee.
Now, with stocks all of these get more complicated. Stocks today are also dematerialised in most countries. That means again some custodian or depository has a letter which says that you have a certain number of some stocks. This is slightly more complicated than maintaining a bank account because stocks come with certain legal rights and financial implications.
Anyway, when you buy or sell stocks, the same payment process takes place, but there’s also the stock transfer, a bit like transferring the title of a property. Both these transactions need the same set of verifications as in the previous payment example. Because of the variety of legal and financial implications of stock ownership, this takes time. Folks need to verify that the buyer has the money (easy), but also that the seller has the stocks (also easy), and that they are free to sell them (complicated). Stocks can be used to reduce margins, or as collateral for loans. The clearing and settlement system makes sure these things are taken care of, and transactions promised on exchanges legitimately go through, at least in most cases. They are basically like the local government office signing off on your real estate transfer, confirming that everything’s clean and proper with the transaction.
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