Clearing / Settlement
Clearing of payment and trade obligations and their final settlement between accounts.
Bundle → Layer → Finding → Questions Filled
3 bundles · 3 layers · 5 findings · 10 questions
Obligations What must be settled and between whom.
Clearing
Matching, netting and novation of obligations.
Obligation set
The obligations submitted for clearing and their netting result.
- Which trades or payments are included, and between which participants?
- Were obligations netted, and what is each net position?
Counterparty role
Whether a central counterparty stepped in.
- Did a central counterparty become the counterparty to each side?
- Which margin or collateral covers the exposure?
Settlement How obligations are discharged.
Movements and finality
The account movements and the moment they become final.
Settlement movement
Debits and credits of money or assets on settlement accounts.
- Which accounts were debited and credited, by which quantities and in which asset?
- Was settlement delivery versus payment or free of payment?
Finality
When the transfer became irrevocable under the system's rules.
- At what time did settlement become final and irrevocable?
- Which system rules define finality?
Exceptions What happens when settlement fails.
Fails and defaults
Failed settlements, buy-ins and participant defaults.
Settlement fail
A movement that did not settle on the intended date.
- Which movement failed, and for what reason?
- Which penalty, buy-in or default procedure applies?
Classifiers Filled
- Family
- World Models
- Category
- Society, people and institutions
- Entry kind
- standalone-mm
- Navigation path
- NAV.SOC.ECO.STL
- Domain
- SOC.ECO.STL
- Industry
- Cross-industry
- Tags
- clearingsettlementsoc.eco.stl
- Also called
- R2
What it is Filled
Clearing and settlement is the process by which obligations arising from payments and trades are calculated, confirmed and finally discharged by transferring money or assets between accounts, recorded as append-only movements of quantities. It covers clearing houses, central counterparties, securities settlement and payment settlement systems, but not the trade or payment instruction itself.
Why it exists Filled
Clearing of payment and trade obligations and their final settlement between accounts.
Distinguishing features Filled
- Movements are append-only: errors are reversed by new entries, never by editing past ones.
- Finality is a legal moment defined by system rules, after which a transfer cannot be unwound.
- It discharges obligations created elsewhere, by trades or payment orders.
- Distinct from a general ledger, which records an organization's own accounting view of the same movements.
What robots and AI may and may not do Filled
Must not
- Release, cancel or alter settlement instructions without authorization.
- Edit or delete a booked movement instead of posting a reversal.
- Disclose one participant's positions to another.
- Give investment or trading advice based on settlement data.
Only with a human decision
- Releasing payment or settlement instructions.
- Declaring a participant default or triggering a buy-in.
- Changing system rules, cut-off times or finality conditions.
May
- Reconcile settlement reports against expected obligations.
- Report net positions, fails and finality times to authorized participants.
- Flag mismatches and pending fails before cut-off times.
- Prepare settlement instructions for human release.
Moral aspects Filled
- Settlement failures can spread losses through the financial system and to ordinary account holders.
- Positions and flows are confidential and can be misused for market advantage.
- Access rules for settlement systems shape who can compete in markets.
Who is affected
- Participants and their customers
- Central banks and supervisors
- Investors and payment users
Owners Filled
Steward
The operator of the clearing or settlement system, under oversight of the central bank or market supervisor.
Master systems
- Central counterparty clearing system
- Central securities depository
- Real-time gross settlement system
Links to other meta-models Filled
references
- wm-eco-009-payment - Payments create the obligations that are cleared and settled.
requires
- world-r2-ledger-and-account - Settlement movements are booked on append-only ledger accounts.
neighbor
- wm-eco-016-financial-transaction-journal-entry - Participants record the same movements in their own books.
What else AI and robots need to interact with it Filled
Identity and identifiers required Filled
- Participants are identified by LEI and system participant codes; securities by ISIN.
- Settlement instructions and movements carry transaction references unique within the system.
Direct properties not applicable Not applicable
Not applicable
Clearing and settlement are institutional processes; quantities are amounts and positions, not physical measurements.
Recognition optional Filled
- A settlement record names participants, an asset, a quantity, an intended date and a status.
- Often confused with the trade, the payment order or the bank's internal ledger posting.
Capabilities and actions required Filled
- Obligations can be matched, netted and novated to a central counterparty.
- Movements can settle, fail, be partially settled or be reversed by a new entry.
- Finality is reached at a defined moment under system rules.
Hazards and failure modes required Filled
- Settlement fails and cascading defaults.
- Operational outages around cut-off times.
- Fraudulent or erroneous instructions released into the system.
Standards and interfaces required Filled
- ISO 20022 messages for payments and securities settlement.
- ISO 15022 messages still used in securities settlement.
- ISO 17442 Legal Entity Identifier and ISO 6166 ISIN for parties and securities.
Context of use required Filled
- Operated by financial market infrastructures under central bank and supervisory oversight.
- Settlement finality is protected by law, for example the EU Settlement Finality Directive.
Sources Filled
- Principles for Financial Market Infrastructures (CPMI-IOSCO)
- Directive 98/26/EC on settlement finality in payment and securities settlement systems (European Union)
- ISO 20022 Financial services - Universal financial industry message scheme (ISO)
Open questions
- Planned model: boundary questions, research and every section remain to be written.
Machine files
Provenance
planned (registry candidate) · todo
Built from: models/runtime-index.json, ver-cy/world-models/card-supplements/wm-eco-010-clearing-settlement.json
Planned entry, hidden from the catalogue until researched.