Payment systems by settlement / circuits

DNS - Deferred Net Settlement (also known as Designated-time Net Settlement)

A net settlement system where final settlements occur between participating banks at the end of a predefined settlement cycle when the net obligations between participants are calculated and presented to the settlement agent for settlement.

Historically DNS payment systems were doing settlement at the end of the day and were quickly replaced by hybrid systems.

RTGS - Real-Time Gross Settlement

A settlement system where final settlements occur real time (continuously throughout the day / transaction by transaction).

Typically these systems were called as “large-value payment systems” (LVPS), but hybrid systems with frequent intraday settlements changed this perception. An example may be polish ELIXIR payment system (hybrid), which finally removed upper limit for single payment operation.

In general, payments processed through an LVPS may feature one or more of the following characteristics:

  • They are of large amounts;
  • They are exchanged among financial market participants (so-called wholesale payments);
  • They are usually urgent and require timely settlement (time-criticality);
  • They are related to important financial market activities such as money market or foreign exchange transactions as well as many commercial transactions.

Examples are:

Characteristics of DNS and RTGS payment systems

 RTGS (real-time gross settlement)DNS (deferred net settlement)
Settlement methodGross (transaction by transaction)Net (multilateral netting)
Settlement frequencyIn real time (continuously throughout day)Discontinuous (at the end of a cycle / the day)
Settlement riskNoYes
Liquidity consumptionHighLow

Hybrid Settlement

Risk issues, especially regarding systemic risk, not only triggered wide-scale adoption of RTGS systems, but also prompted many payment systems still using net settlement to develop mechanisms to reduce their risk‑related drawbacks. As a result, the use of DNS systems in the strict sense became rarer, especially for processing large-value payments. DNS systems were converted into “hybrid” systems combining the advantages of both settlement approaches.

In May 2005, the CPMI published a review of the various types of systems in use for processing large-value payments: “New developments in large-value payment systems”, CPSS, BIS, May 2005.

The key feature of hybrid systems lies in their frequent netting of payments throughout the day, with settlement providing immediate finality. The approach generally adopted is to keep payments in a queue (often centralised) and offset positions continuously or at close intervals. Settlement can take place as soon as the net debit balances are covered. Payments that cannot be settled remain in the queue until the next batch of netting and settlement processes are executed.

The frequent netting in hybrid systems is intended to limit liquidity needs relative to those of an RTGS system. At the same time, the risk associated with DNS systems is generally limited in hybrid systems because:

  • only payments linked to covered net positions are processed in each batch of netting operations and
  • final settlement of net positions takes place immediately after each batch of netting operations.

Examples are:

Usage statistics / RTGS vs DNS popularity

Payment system name (type and location)Average daily transactions in 2016 (volume)Average daily transactions in 2016 (value)
TARGET2 (RTGS EU)243726EUR 1330,99 billion
EURO1 (hybrid EU)146136EUR 112,61 billion
Fedwire (RTGS USA)360547USD 2101,26 billion
CHIPS (hybrid USA)266027USD 998,16 billion

Source: Bank of International Settlements, Statistics on payment, clearing and settlement systems in the CPMI countries, CPMI Papers, No 172

Note: in above calculations we have assumed that year 2016 consisted of 365 working days. So each calendar day was treated as working day in particular payment system. This is generally wrong assumption, but approach seems to be OK for daily volume/value comparison.

Features of selected interbank funds transfer systems (at end of 2016)

Following Features of selected interbank funds transfer systems (at end of 2016) publication we list various payment systems characteristics:

CountrySystemTypeSettlementOwner/managerProcessingMembershipDegree of centralisationPricingClosing time for same day transactionsSettlement finalityCut-off third-party ordersStandard money market hours - openingStandard money market hours - closing
AustraliaRITSLRTGSCBRTTOCV18:28; 20:28Real time18:05; 20:0507:3018:30; 20:30
BelgiumTARGET2-BELRTGSCBRTTRCF18:00Real time17:0007:0018:00
BelgiumClearing houseRMNB, CBRTTOCF15:15navnavnapnap
BelgiumCECRMNB, CBRTTOCF15:00navnavnapnap
BrazilSTRLRTGSCBRTTOCF18:30Real time17:3006:3018:30
BrazilSITRAFRMN, BN, GPARTTOCF17:00Intraday17:00napnap
BrazilBmfBovespa-FXFXMNOtherACHOCF10:00T+2; 14:05napnapnap
BrazilSILOCRMNPAACHOCFnapT+1; 08:20; 16:1021:59napnap
BrazilCOMPERMNBACHOCFnapT+1; 09:00; 17:15napnapnap
CanadaLVTSLMNPARTTOCF18:30Real time18:00napnap
CanadaACSSRMNPAnapRDFnapnapnapnapnap
CanadaInterac e-TransferRBNOthernavnavDnavnapT+1napnapnap
ChinaHVPSLRTGSCBRTTOCF17:30Real time17:0008:3017:00
ChinaBEPSRMNCBRTTOCF16:00Intradaynapnapnap
FranceTARGET2-BDFLRTGSCBRTTRCF18:00Real time17:0007:0018:00
FranceCORE (FR)RMNBACHOCF13:3015:15napnapnap
GermanyTARGET2-BBkLRTGSCBRTTOCF18:00Real time18:0007:0018:00
GermanyRPSRBACBACHOCF09:00, 10:00, 13:00Intradaynapnapnap
Hong Kong SARHKD CHATSL, FXRTGSCB, BRTTOCF18:30Real timenap08:3018:30
Hong Kong SARUSD CHATSL, FXRTGSBRTTOCF18:30Real timenap08:3018:30
Hong Kong SAREUR CHATSL, FXRTGSBRTTOCF18:30Real timenap08:3018:30
Hong Kong SARRMB CHATSL, FXRTGSBRTTOCF05:30 next dayReal timenap08:3005:00 next day
IndiaRTGSRRTGSCBRTTRDV20:00Real time16:3009:0017:00
IndiaClearing House - Cheque ClearingRMNCB, BM, ACHRD, CS19:30T+1napnapnap
IndiaClearing House - ECS / NECSRMNB, CBM, ACHRCS17:00T+1napnapnap
IndiaClearing House - NACHRMNB, PAACHRC      
IndiaClearing House - UPIRMNB, PARTTRC      
IndiaClearing House - NEFTRMNCBACHRCS19:00Intradaynapnapnap
ItalyTARGET2-BDILRTGSCBRTTOCF18:00Real time17:0007:0018:00
ItalyBI-COMPRMNCBACHOCF12:00 12:00napnap
JapanBOJ-NETLRTGSCBRTTRCV21:00Real time21:0008:3021:00
JapanFXYCSLRTGSBRTTRCF21:00Real time21:0008:3021:00
JapanZengin SystemRMNBRTTRCF15:3016:15, Real time15:30napnap
JapanTokyo Clearing HouseRMNBACHRCF08:0012:3008:00napnap
KoreaBOK-Wire+LRTGSCBRTTRCF17:30Real time17:3009:0017:30
KoreaCheck Clearing SystemRMNPAM, ACHOD, CF16:00T+1 11:00napnapnap
KoreaInterbrank Shared NetworksRMNPARTTOCF18:00, 23:55, 14:00/17:00T+1 11:00napnapnap
MexicoSPEIL, RMNCBRTTOCF17:59Real time17:3018:0017:59
MexicoCECOBANRMNBACHOCFnapT+1nap14:0023:00
NetherlandsTARGET2-NLLRTGSCBRTTRCF18:00Real time17:0007:0018:00
NetherlandsEquensRMN, BABACHRCF17:00every 30 min15:30napnap
RussiaBESP SystemLRTGSCBRTTRCV21:00Real time21:0010:0019:00
RussiaNSDL+R, FXRTGS, BABRTTOCV20:30Real time20:3010:0019:00
RussiaVERL, RGCBRTTOC, DV21:00Intraday21:0010:0019:00
RussiaMERL, RGCBRTTOCV21:00Intraday21:0010:0019:00
RussiaPayments using letters of adviceL, RGCBACHODV21:00T+321:0010:0019:00
Saudi ArabiaSARIEL, RRTGSCBRTTRCF16:00Real time15:3009:0016:00
SingaporeMEPS+(IFT)LRTGSCBRTTOCV19:00Real time19:0009:0019:00
SingaporeSGDCCSRMNPAACHOCF17:3015:05, 18:15napnapnap
SingaporeUSDCCSRMNPAACHOCF15:30T+1, 10:30napnapnap
SingaporeIBGRMNPAACHOCF12:0018:15napnapnap
South AfricaSAMOSL, RRTGSCBRTTRCF24:00Real timenap08:0012:00
SwedenRIXLRTGSCBRTTRCF17:00Real time17:0009:0016:15
SwedenBankgirotRMNBACHOCFnapIntraday16:20napnap
SwedenDataclearingRMNBACHOCFnapIntraday15:20napnap
SwitzerlandSICL, RRTGSB, CBRTTODF16:15Real time15:0007:0018:00
TurkeyEFTL, RRTGSCBRTTOCF17:30Real time17:2908:3017:30
TurkeyGaranti Payment SystemsRMNBACHRCFnapT+2napnapnap
TurkeyInterbank Card CenterRMNBACHOCFnapT+2napnapnap
TurkeyInterbank Clearing HouseRMNCB, BACHODFnapT+2napnapnap
United KingdomCHAPS SterlingLRTGSB, CBRTTRCF16:20Real time16:0007:0016:00
United KingdomCheque/creditRMNBACHRDFnap napnapnap
United KingdomBACSRMNBACHRCFnap napnapnap
United KingdomFaster Payments ServiceRMNBRTTRCFnapIntradaynapnapnap
United States of AmericaCHIPSLMN, BN, GBRTTRCF17:00Intraday17:0021:0017:00
United States of AmericaFedwireLRTGSCBRTTOCF18:00Real time18:0021:0018:30
European UnionTARGET2LRTGSCB, B, PARTTR, OCF18:00Real time17:0007:0018:00
European UnionEURO1/STEP1LMNBRTTRCF16:00about 16:3016:0007:0018:00
European UnionSTEP2RBABACHRCFnapMultiplenap16:00 on D-102:00 on day D

Legend:

  • System - payment system name, eg. Fedwire
  • Type - x such as:
    • L
    • R
    • FX
  • Settlement - x
  • Owner/manager - owner / manager of payment system such as:
    • B - bank
    • CB - central bank
    • PA - payment association
    • Other - x
  • Processing - x such as:
    • RTT - real time transaction
    • ACH - automated clearing house
    • M - manual
    • nap - not applicable
    • nav - not available
  • Membership
    • O - x
    • R - x
    • nav - not available
  • Degree of centralisation
    • C - centralised
    • D - decentralised

Address

T24 Competence Centre sp. z o.o. sp. k.
Okopowa 56/33
01-042 Warszawa, mazowieckie
Poland

Registry details

KRS0000673252
VAT#PL5272804525
REGON367033759
PEN by IANA1.3.6.1.4.1.55225

Phone

+48222428165