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Netting of Cash Payments

Netting of Cash Payments

Description

Netting of payments (in this context) represents the ability for a firm to agree to offset the cash collateral owed in return against the cash realised from a variety of corporate actions.

From member firms survey, it seems to suggest that under 40% of counterparties are currently willing or able to net these payments, this indicates that in the region of 15% of SFTs would qualify for this activity.

Best Practice

Netting of payments can be a useful way to facilitate the balance of large positions, it is clearly advantageous to be able to perform, however there is extra operational risk and manual work to perform as different departments and accounts have to work in symmetry.

Best practice is for firms to agree these nettings bilaterally and look to implement the ability in the future. (COAC-140)

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