Upon completion of this program, participants will be able to:

• Differentiate between gross settlement, deferred net settlement, and their respective risk profiles.
• Describe the role of the central bank and Central Counterparties (CCPs) in managing settlement risk.
• Analyze the process of **multilateral netting** and the resulting principal-risk exposure.
• Identify and apply risk mitigation techniques for clearing (e.g., margining, collateral, default funds).
• Understand the legal concepts of **novation** and **finality of settlement** in clearing and netting.
• Evaluate the liquidity and funding needs associated with the clearing and settlement cycle.
• Interpret and assess compliance with the **CPMI-IOSCO Principles for Financial Market Infrastructures (PFMIs)**.
• Formulate strategies to manage a participant default event in a multilateral clearing system.

• Central Bank Payments and Clearing Analysts
• Commercial Bank Operations and Treasury Professionals
• Clearing House and FMI Risk Management Staff
• Securities and Derivatives Operations Specialists
• Compliance and Audit Professionals for Financial Markets
• Financial Regulators overseeing Settlement Systems

Clearing risk modeling and exposure calculation, Default management team role-playing, Case studies of CCP risk management failures, Group assignments on PFMIs gap analysis, Workshops on margin and collateral determination, Technical walk-through of DvP/PvP settlement.

Unit 1: Settlement Fundamentals and Risk

• The core functions of clearing and settlement in financial markets.
• Real-Time Gross Settlement (RTGS) as the benchmark for finality.
• Deferred Net Settlement (DNS) and the concept of multilateral risk.
• Payment-versus-Payment (PvP) and Delivery-versus-Payment (DvP) mechanisms.

• Defining **principal risk** and the sources of credit and liquidity risk in settlement.
• Multilateral clearing risk: the "survivor's loss" and the potential for systemic contagion.
• The legal importance of the **netting rule** and its enforcement.
• Historical case studies of settlement failures and their impact.

Unit 2: Clearing and Risk Mitigation

• How a CCP manages and centralizes counterparty risk (novation).
• CCP margining systems: initial margin, variation margin, and stress testing.
• The structure and use of the CCP Default Fund ("the Waterfall").
• Risk-based approach to setting collateral and haircut requirements.

• Detailed process of calculating and settling multilateral net obligations.
• Legal requirements for the irrevocability of net obligations.
• Procedures for managing a participant default and the process of **loss allocation**.
• The use of "back-loading" and other crisis-management tools.

Unit 3: Liquidity and Funding Management

• Forecasting peak intraday and end-of-day liquidity needs for settlement.
• Central bank provision of liquidity to CCPs and settlement systems.
• The role of the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) in clearing.
• Managing the funding risk associated with collateral transformation.

• The role of Central Securities Depositories (CSDs) and Securities Settlement Systems (SSS).
• Impact of Distributed Ledger Technology (DLT) on the clearing and settlement cycle.
• The use of message standards (e.g., ISO 20022) for inter-system communication.
• Challenges in reconciling trade and settlement data across multiple platforms.

Unit 4: Oversight and Governance

• In-depth review of the **CPMI-IOSCO Principles for FMIs** for clearing systems.
• The central bank/regulator's role in oversight, supervision, and crisis planning.
• The legal enforceability of netting agreements across international jurisdictions.
• Requirements for FMI recovery and resolution planning (RRP).