STSM126020 | Financial markets: financial markets issues: settlement netting - an overview

To reduce share transaction settlement costs in CREST, a financial entity may offer a service to its clients/participants whereby multiple gross buy and sell share transactions undertaken in a single UK ‘chargeable security’ on the same regulated market (or multilateral trading facility (MTF) /recognised foreign exchange) between itself and a counterparty are effectively netted on a daily basis and a single net buy or sell transaction instruction is input to the CREST system for settlement.

A financial entity which offers a settlement netting service to its clients is commonly called a net settlement provider.

The ability to perform settlement netting will depend on whether a financial entity wishes to provide netting services itself, or signs up to a settlement netting service which may be available to it via a third party settlement netting provider.