Settlement design and failure

What You Can Do After This Chapter

Learning objective. Learner explains how settlement cycles are designed, how liquidity is optimised with queues and offsets, and how gridlock is detected and resolved. Learner describes intraday credit and collateral, the central bank accounts used in settlement, what happens when a participant cannot settle, and the order of the default waterfall.

Practical assessment. Learner receives a case where a payment system faces a gridlock at midday with four banks waiting on each other, then explains the gridlock, applies the offset, and states the intraday credit and collateral steps. Learner also drafts the default waterfall for a participant failure.

Expected deliverables.

• Settlement cycle design note
• Gridlock worked example with offset
• Intraday credit and collateral table
• Default waterfall diagram

Completion criterion. Learner explains the gridlock and the offset correctly, states the intraday credit and collateral rules, and drafts the default waterfall in the right order.