Hi Aditiya,
if I correctly understand your situation, your contract is already in the activity category 'Contract Settlement' (you can verify this by SAP trans. FTR_EDIT -> see tab 'Status' -> see field 'Activity category'), so this (standard SAP Treasury workflow) step - Settlement (kind of verification) - does not makes sense.
this workflow for financial instruments is defined in IMG -> Treasury and Risk Management -> Transaction Manager -> Money Market/Foreign Exchange/Securities /OTC Derivatives/Listed Derivatives -> Transaction Management -> Transaction Types Define Transaction Types -> see a field 'Processing category'. so you have to make sure that Users are using relevant functions for the contracts they are working with.
hope it makes sense.
Kind regards,
Renatas