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 ?
The bank will experience compliant workflow functionality for credit risk and settlement risk limits with a smooth monitoring of limit utilization.
Noble represents a truly revolutionary step towards greater flexibility and functionality in post-trade, and an industry-changing approach to reducing counterparty settlement risk for OTC trading.
STP is a payment formatting standard involving automatic processing technologies which reduces the cost, time of payment processing, and settlement risk.
They become sub-members of NPCI through a sponsor bank, which takes the responsibility of settlement risk and liquidity.
This case focuses on the use of computer software to eliminate settlement risk.
In particular, what makes a settlement time critical is that all the participants in a payment, clearing, or settlement system agree to meet their obligations according to protocols (including cutoff times) that are calculated to mitigate settlement risk and result in final intraday settlement.
Because the checks were certified, the NYSE security settlement risk was concentrated among clearinghouse banks, rather than among brokers.
According to CEO Rick McVey, the target, with clients including the UK Financial Services Authority (FSA), is in a good position to play a key role in the European markets, especially at a time when regulators seek to reduce trade settlement risk and increase market transparency in order to meet the requirements under the Markets in Financial Instruments Directive (MiFID).
payment framework to mitigate counterparty settlement risk.
Japan) reviews trends in payment systems over the last 20 years, especially in response to information technology, and explains how these trends led to the reduction of settlement risk and improvements in settlement efficiency.
The existence of settlement risk is one reason why banks need to ensure they have adequate liquidity resources at all times.
RTGS systems eliminate the settlement risk from unwinding because payments are settled irrevocably, and with finality, on an individual gross basis and in real time.