Delivery versus Payment (DvP) Definition: Mechanism used in securities transfers transactions, which ensures that the final transfer of the securities (the delivery) can be considered completed only if the actual payment for the transaction has been made. Details: This is used when a financial institution is selling securities to another financial institution and the actual… Read More »
Netting Definition: An agreed offsetting of obligations between two or more parties or participants in which a great number of obligations is reduced to a smaller number of obligations. Details: Basically this is the equivalent of two or more friends that sit on a table and net between themselves to sort the money transfer. The… Read More »
Gross Settlement Definition: The settlement of funds and securities transfer, which is affected individually on an order-by-order basis, i.e. without netting debit against credit payment transfers. Details: In laymen terms this is basically the simplest possible payment operation. One actor gives money to another actor in a form that is recognized by both parties as… Read More »
Payment Message Definition: A set of data transferred via an electronic mechanism representing the sender and receiver of the transaction and the amount to transfer, which enables the settlement of transactions between participants in a payment system. Details: In layman terms (not using the banking jargon) a payment message is an electronic representation of a… Read More »
Payment Definition: The payer’s transfer to the payee against a payee’s monetary claim in a manner acceptable for the payee. Details: It is funny that this definition looks like a self defining definition. Basically in layman terms (not using the banking jargon) a payment is a transfer of value from one party to another party,… Read More »
Real Time Gross Settlement Definition: Gross settlement of payment instructions one by one in which processing and settlement take place in real time (continuously). Details: The most well known examples for infrastructure payment systems that implement this type of settlement are the so called: Real Time Gross Settlement (RTGS) systems: the top level payment systems… Read More »
Settlement Finality Principle Definition: The governing principle within a Real Time Gross Settlement (RTGS) System that once a payment has been submitted to and processed by the RTGS the payment/settlement is final and irrevocable. Details: The finality principle comes from the juridical domain where has the meaning that certain disputes must achieve a resolution from… Read More »
Settlement Account Definition: An account with the Central Bank, which is maintained in the RTGS (Real Time Gross Settlement) system by a Participant institution subject to the rules and procedures of the RTGS system. An account with a Central Bank, a settlement agent, or a counter-party, used to hold funds and securities and to settle… Read More »
Settlement Definition: Settlement at the Central Bank is a process (operation) through which actual funds transfer is executed between the settlement accounts of the sending and receiving institution held with the Central Bank in the RTGS (Real Time Gross Settlement) system. Settlement is the mechanism by which obligations in respect of funds transfer or in respect of… Read More »
Liquidity Definition: The ability of a settlement system participant to meet its current obligations in respect of funds and/or securities transfer. The liquidity of a Participant in the settlement system is measured by four components: Available balance (funds) on the current account Queued payment transfers from other participants in the settlement system to its account… Read More »