Settlement risk

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Settlement risk

The risk that one party will deliver and the counterparty will not be able to pay and vice versa.

Settlement Risk

The risk that a trade will not settle. For example, a buyer may not receive delivery of the securities he/she bought by the settlement date, or the seller may not receive payment. This may occur because of the negligence or deliberate withholding by one party or the other. If a party does not receive the securities or payment, he/she is not obligated fulfill his/her end of the bargain until delivery or payment is made, but this can render him/her unable to conduct other activities that would advance his/her investment goals.
References in periodicals archive ?
At the same time, the BSP strongly encourages industry participants to adopt prudent governance standards in line with international best practices pertaining to trading and settlement, documentation, accounting, and market and regulatory disclosures as well as to establish appropriate safeguards to address risks such as counterparty and settlement risks.
At the same time, (BSP) strongly encourages industry participants to adopt prudent governance standards in line with international best practices pertaining to trading and settlement, documentation, accounting, and market and regulatory disclosures as well as to establish appropriate safeguards to address risks such as counterparty and settlement risks," it added.
Furthermore, in line with the national payments system strategy, we are addressing settlement risks in the payments system, by signalling that the Central Bank will cease its implicit role of lender last resort to the payments system.
Distributed ledgers can also shorten the time required to settle securities transactions, which currently take up to three days, as well as lower counterparty and settlement risks.
The implementation of delivery-versus-payment (DvP) systems for securities and analogous payment-versus-payment (PvP) systems for foreign exchange to mitigate settlement risks in those markets; and
Our analysis shows that the NYCHA played a similar role in managing NYSE security settlement risks, and by encouraging the NYSE to adopt more efficient clearing processes.
The new step is expected to cut transaction costs, reduce settlement risks at financial institutions, revitalize the Tokyo market and spur yuan-denominated trade.
We look forward to reduce post-trade settlement risks and enhance scale benefits for members.
As the volume and value of transactions increased, however, central banks became worried about settlement risks inherent in netting systems.
I am talking about, for example, state-of-the-art, real-time gross settlement payment systems, which achieve payment versus payment, and finality of settlement in our time zone without settlement risks," he said.
As part of this strategy, the CPSS encouraged central banks to promote action by commercial banks to manage and reduce their foreign exchange settlement risks.
The two sides agreed on how to devise rules on Singapore's expropriation of land obtained by Japanese firms operating in the city-state, and launching studies for a real-time settlement system between their central banks so as to reduce currency settlement risks.