Market Structure · Post-trade
Clearing, settlement & fails
What happens after the trade: CCPs, netting, DVP, and why breaks become settlement fails.
Step 1 of 4 · Overview15 min read ·
Trade date (T)
executed + booked
Affirm/confirm
both sides agree details
Clearing
CCP becomes buyer to every seller
Netting
many trades → one net obligation
Settlement (T+1)
securities vs cash (DVP)
A central counterparty (CCP) like NSCC steps between buyer and seller, so if one side defaults the other is still protected. Netting collapses thousands of trades into one net delivery per security.
DVP (delivery versus payment) means securities move only if cash moves, removing the risk of delivering and not getting paid.
Key idea
At work: an unresolved break by the affirmation cutoff can become a settlement fail, which costs money (fail charges, funding) and regulatory attention. That's why T+1 compressed ops timelines so much.Next: Practice