ALERT: Settlement Chain Terms

The settlement chain vocabulary includes the set of terms defined as shown in Table 2 . The first four items are roles that parties can take in transactions.

Table 2  Settlement Chain Terms
Term Definition
Buyer/seller

The principal party doing the buying or selling.

For investment managers, principal party is typically the manager of the fund being traded. For broker/dealers, it is typically the actual broker/dealer on the trade.

Custodian

If there is a custodian, it is the buyer/seller’s direct service provider.

For a fund, this is typically the global custodian.

Security correspondent

If there is a security correspondent, it is the custodian’s direct service provider.

In many cases, a regional bank might private-label an actual global custodian’s services. In this case, the regional bank is viewed as the custodian, because it provides the services directly to the buyer/seller. The actual global custodian is the correspondent for the custodian role.)

Local agent

The agent in the local marketplace that actually clears or settles the transaction.

The local agent is typically a participant of the depository or clearing house.

PSET The place of settlement; that is, the central security depository (CSD) or international central security depository (ICSD) where the clearance is taking place.
Account numbers

The account number of one party relative to its account at the next party level, regardless of how many parties are in the settlement chain.

For example, the account number of a buyer/seller at its custodian.