Payments and Market Infrastructure
The Global Risks Alliance (GRA)
After a trade, clearing confirms and nets obligations and settlement delivers securities against cash. Central securities depositories, securities settlement systems and settlement agents do this work. Settlement failures, delays and shortened cycles affect liquidity and counterparty risk across markets. This page sets out how clearing and settlement risk arises, how it is measured, and who decides.
Clearing and settlement · RTGS system · Business day 190
Fig.RTGS operations console. Design wireframe with placeholder names and illustrative values, not a record or a live system.
Securities clearing and settlement is the process that confirms trades, nets obligations and delivers securities against cash. Central securities depositories and settlement systems do this work, and shorter cycles reduce exposure while compressing operations. Securities regulators, CSD boards, participants and overseers hold the decisions.
How a failure at one financial centre can spread through settlement links. Design links, not real dependencies.
Settlement exposures and infrastructure. The dossier below sets out how the risk develops, what is measured, where the data come from, how it is modelled and who decides.
Delivery-versus-payment ensures securities move only if cash moves. Where it is absent, one party can deliver and not be paid.
Moving from two days to one day after trade reduces exposure but leaves less time to fix errors, fund trades and handle cross-border time zones.
A failure to deliver one security can prevent the recipient from delivering onward, creating chains of fails across participants.
Central securities depositories hold record of ownership for whole markets. Their failure would freeze settlement and ownership records.
Each term as this page uses it. Where a standard-setting body defines the term, the wording follows that body.
| Term | Definition |
|---|---|
| Settlement cycle | The time between trade date and the date securities and cash are exchanged. |
| Settlement fail | A transaction that does not settle on its intended date because securities or cash are missing. |
| Central securities depository | An entity that holds securities accounts and records ownership for a market. |
Each indicator carries its unit, its cadence, the kind of source behind it and the evidence label a value would carry. No values are shown: a programme supplies them under its own authority.
| Indicator | Unit | Cadence | Source type | Label |
|---|---|---|---|---|
| Settlement fail rate | share of instructions or value failing on intended date | monthly | CSD and regulator data | OFFICIAL |
| Settlement cycle length | days after trade date | on change | Market rules | OFFICIAL |
| Value settled through CSDs | currency per year | annual | CPMI statistics | OFFICIAL |
| Cash penalties for settlement fails | currency | monthly | CSDR penalty data | OFFICIAL |
| Straight-through processing rate | share of trades processed without manual intervention | periodic | Industry surveys | REPORTED |
| CSD links | count of interoperable links | annual | CSD disclosures | DECLARED |
The topic as a computational graph: named sources feed the methods, an evidence review gates the outputs, and the decisions stay with the authorities that hold them.
Fig. 02Nodes carry their type, two metric rows and a state; connectors show what feeds what; dashed frames name the owners; the timeline is the cadence. Design of the pipeline, not a record of a run.
Named public datasets and institutional records, each with its licence class. Sources by agreement are used only under their terms and never republished.
| Source | What it gives | Licence class |
|---|---|---|
| ESMA CSDR settlement fails data and reports | EU settlement efficiency and penalties | Free, EU reuse terms |
| SEC and industry reports on the move to T+1 | Implementation and effects of the shorter cycle | Public domain and public reports |
| CPMI Red Book statistics | Securities settlement volumes | Free, BIS terms |
| CSD PFMI disclosure frameworks | Self-assessments of depositories | Public records, terms per CSD |
| ECB TARGET2-Securities reports | Operation of the euro area securities settlement platform | Free, ECB terms |
Payments and Market Infrastructure prepares evidence. The decisions below are taken by the authorities named, under their own rules, and never by the platform.
| Who decides | The question | Evidence this page serves |
|---|---|---|
| Securities regulators | What settlement cycle and discipline rules apply | Fail data and cycle change evidence |
| CSD and settlement system boards | How to invest in resilience and links | PFMI assessments and incident history |
| Market participants | How to prepare operations and funding for shorter cycles | Industry readiness evidence |
| Central bank overseers | Whether settlement systems meet standards | Disclosure and oversight records |
Between the moment a trade is agreed and the moment it settles, each party is exposed to the risk that the other fails to deliver. These exposures can be large and can spread across the system if a major participant defaults. Settlement infrastructure is designed to shorten, reduce and control them. Changes such as shorter settlement cycles alter the balance between exposure and operational pressure.
Settlement risk combines credit, liquidity, legal and operational elements.
The risk of delivering an asset or payment without receiving the counter-value. Delivery-versus-payment designs remove it.
Settlement finality makes a transfer irrevocable at a defined moment, protecting it from being unwound if a participant fails.
Settlement depends on accurate data, matching and reconciliation. Errors and outages cause failed settlements.
Tokenization and distributed ledgers are often presented as ways to settle instantly and atomically. Research suggests that they could reduce some reconciliation burdens and exposures, but they also raise questions about settlement asset, legal finality, interoperability with existing systems and operational resilience of new platforms. These questions are best examined jointly by the industry, before any architecture becomes entrenched.
Settlement efficiency and fail rates published by infrastructures. Granularity varies.
Review of finality, insolvency and collateral law across jurisdictions.
Mapping of settlement workflows and dependencies, applying reliability and resilience engineering.
Study of how ledger-based settlement could change processes and risks, applying distributed ledgers and digital assets. Most applications remain at pilot stage.
The current service level is R0: information and enquiries. An enquiry receives a reference and names the next step; applications, payments, compute allocations and registrations open only when their team, terms and review capacity exist.