A settlement that is effected through transfers of securities and/ or monetary amounts on the registers of a single intermediary (such as a bank/ investment firm). This type of settlement requires both counterparties to maintain their securities and/ or cash accounts with the same intermediary. This is opposed to settlement via an interbank funds transfer system or a central securities depository (CSD).
Internal settlement of securities takes place by simultaneous book entries whereby a credit of securities is made to a securities clearance account and a debit of securities is made from another securities clearance account. If settlement is against payment, the transaction also includes a credit of cash to a certain cash account and a debit of cash from another cash account.
Internal settlement may also denote the transfer of collateral between pools maintained by an institution for a specific purpose.
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