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Settlement finality

EU law minimising risks associated with the transfer of financial instruments and payments, especially those risks which are linked to the insolvency of transaction participants.

Settlement Finality Directive

The Settlement Finality Directive (SFD) adopted in May 1998 regulates designated systems used by participants to transfer financial instruments and payments. It guarantees that transfer orders which enter into such systems are also finally settled, regardless of whether the sending participant has become insolvent or transfer orders have been revoked in the meantime. The participants to designated systems may be

  • financial institutions, e.g. banks
  • systems operators, such as central securities depositories (CSDs) or central counterparties (CCPs)

Notifications requirements

The SFD requires Member States to designate to the European Securities and Markets Authority (ESMA)

  • the national systems and the respective system operators which are to be included in the scope of this directive (Article 10)
  • the national authorities that must be notified when insolvency proceedings are opened against a participant or a system operator (Article 6.2)

This information is published by ESMA on their website.