Continuous Net Settlement

Continuous net settlement (CNS)

Method of securities clearing and settlement using a clearing house, which matches transactions to securities available, resulting in one net receive or deliver position at the end of the day.

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continuous net settlement (CNS)

The settlement of securities transactions among brokers and dealers in which all transactions are netted out by the National Securities Clearing Corporation in order to minimize the movement of physical certificates and money balances. With continuous net settlement, only net settlement balances need be moved. For example, if during a day of trading, Merrill Lynch purchases 1,000 shares of SBC Communications for one customer and sells 1,000 shares of SBC Communications for another customer, Merrill Lynch will have a zero net settlement in this stock, with no movement of securities required.

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Continuous Net Settlement

A clearing system in which bids and offers for securities are placed together and matched on a continuous basis. Continuous net settlement is conducted electronically and attempts to maintain liquidity and efficiency in the market.

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Continuous net settlement. In continuous net settlement, most securities transactions are finalized, or cleared and settled, within a broker-age firm.

The firm's clients' orders to buy and sell are offset, or matched against each other, so that at the end of the trading day only those positions that haven't been offset internally remain to be settled.

In a simplified example, all the shares of Stock A that a firm's clients bought are netted against all the shares that its clients sold by reallocating ownership on the firm's books. Payment is handled in a similar fashion, as money is transferred from the buyers' account to the sellers'.

If the firm has more buys than sells or the other way around, as is likely, it either delivers shares or receives them and makes a payment or receives it.

Clearing and settlement for transactions that aren't offset are handled by an automated system through two branches of the Depository Trust and Clearing Corporation (DTCC), the National Securities Clearing Corporation (NSCC), and the Depository Trust Company (DTC).