Payments and markets glossary

The holding of physical securities on behalf of other parties.

Funds which the recipient is entitled to transfer or withdraw from an account on the day of receipt. See also intraday liquidity

Technique for managing payment queues by determining the order in which payments are accepted for settlement. See also queuing

A location other than the primary site which systems can use to resume their business operations and other functions in the event of a disaster.

A system which allows the transfer of securities, either free of payment (FOP) or against payment (delivery versus payment).

A method of protecting a client’s assets by holding them separately from those of the custodian (or other clients, as the case may be).

A self-service device that allows customers to pay for their purchases with either cash or a payment card.

See Single Euro Payments Area (SEPA)

Function within an electronic payment instrument scheme that relates to any payment service, crypto-asset service or technical service provided to end users within the scheme.

A set of rules covering all material aspects governing an electronic payment instrument scheme which is uniform throughout the scheme, irrespective of whether the rules are based on a multilateral agreement, general terms and conditions or standardised bilateral contracts. These rules typically cover a common name and/or logo.

The completion of a transaction or of processing with the aim of discharging participants’ obligations through the transfer of funds and/or securities. A settlement may be final or provisional. See also final settlement, gross settlement, net settlement, provisional settlement

An account held at a central bank or a central securities depository, or with a central counterparty or any other institution acting as a settlement agent, which is used to settle transactions between participants in a system.

The institution across whose books transfers between participants take place in order to achieve settlement within a settlement system. See also bilateral net settlement system, multilateral net settlement system, settling participant

An asset or a claim on an asset that is accepted by a beneficiary in order to discharge a payment obligation.

See settling participant (settlement bank; settling member)

In the field of securities, the time period that elapses between the trade date and the settlement date.

See settlement day (settlement date)

The day on which settlement actually takes place.

The inability of a participant to meet its settlement obligations in a system. This inability may be temporary or permanent. See also default, failed transaction

See settlement agent (settlement institution)

See settlement cycle (settlement interval)

In a transfer system, the time lag between the acceptance of the transfer order by the system and its final settlement. In an exchange-for-value system, the time lag between entering into a trade/bargain and finally exchanging the financial asset for payment.

The requirement, as a result of the settlement process, that a participant in a settlement system effect payment or deliver assets.

The risk that settlement in a transfer system will not take place as expected, usually owing to a party defaulting on one or more settlement obligations. This risk includes, in particular, operational risks, credit risks and liquidity risks. See also credit risk, liquidity risk, operational risk

A system used to facilitate the settlement of transfers of funds, assets or financial instruments. See also funds transfer system, securities settlement system

See settling participant (settlement bank; settling member)

A participant which maintains one or more accounts with a settlement agent in order to settle funds or securities transfers on its own behalf or, potentially, for other market participants. See also settlement agent, tiering arrangement

securities financing transaction

A process initiated by European banks and supported, inter alia, by the Eurosystem and the European Commission with a view to integrating retail payment systems and transforming the euro area into a true domestic market for the payment industry.

See systemically important payment system (SIPS)

See chip card (smart card)

A till that may look and operate like a standard cash till but which uses additional technology that accepts, counts and authenticates euro banknotes and coins and dispenses change.

An entity, usually a credit institution, that provides international central securities depositories (ICSDs) with safekeeping and asset servicing for physical certificates (“individual notes”) that represent shares in international debt instruments (e.g. Eurobonds). See also common depository

See securities settlement system (SSS)

A central bank credit facility available to counterparties at their own initiative. The Eurosystem offers two overnight standing facilities: the marginal lending facility and the deposit facility. See also deposit facility, marginal lending facility

An instruction from a customer to its bank to make a regular payment of a fixed amount to a named beneficiary.

See straight-through processing (STP)

The automated end-to-end processing of trades/payment transfers – including, where relevant, the automated completion of confirmation, matching, generation, clearing and settlement of orders.

A situation in which an institution which has provided securities as collateral recalls them and replaces them with other securities of equivalent market value.

A loss-sharing arrangement which, in the event of a participant’s inability to settle, requires losses to be borne by the other (non-defaulting) participants in accordance with a predetermined formula. Antonym: defaulter pays

The risk that the inability of one participant to meet its obligations in a system will cause other participants to be unable to meet their obligations when they become due, potentially with spillover effects (e.g. significant liquidity or credit problems) threatening the stability of or confidence in the financial system. That inability to meet obligations can be caused by operational or financial problems.

A payment system which has the potential to trigger systemic risks in the event of it being insufficiently protected against the risks to which it is exposed.