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End-of-day net funds settlement is conducted through settling banks that act on behalf of participants, so that funding occurs via a single transmission, called the National Settlement Service (NSS), to the Federal Reserve.

  • About

    The Depository Trust Company (DTC) and National Securities Clearing Corporation (NSCC) use the Federal Reserve’s National Settlement Service (NSS) to process end-of-day net funds settlement, by a single file transmission to the Federal Reserve. Each Participant is required to appoint a settling bank to act on its behalf, although the Participant remains primarily liable for settlement of any net funds obligation due. Settling banks are DTC Participants and member banks of the Federal Reserve System, having accounts at the Federal Reserve to which funds due may be credited and from which funds owed may be debited. Each settling bank nets credits and debits among the participants on behalf of which it settles, reducing the number and volume of transactions, adding efficiencies to the process.

  • Who Can Use the Service

    End-of-day settlement is available to Participants.

  • Benefits

    End-of-day settlement provides same-day settlement finality, thereby reducing the duration of settlement risk for participants.

    The single funds transmission at end of day, replacing individual Fedwire funds transfers, improves operational efficiency and reduces operational risk for participants.

  • How the Service Works

    Throughout the settlement processing day, as transactions are processed against a participant’s account, settlement debits and credits are updated in the settlement system on a real-time basis.

    DTC debits and credits arise primarily from securities transfers versus payment, but are also incurred from payment orders and distributions including principal and income payments for securities credited to the participant’s securities account. NSCC debits and credits are also tracked throughout the day and result primarily from NSCC’s Continuous Net Settlement (CNS) activity. At the end of the day, a final net debit or net credit is calculated for DTC – and, if applicable, NSCC – for each participant account.

    Through cross endorsement between DTC and NSCC, a participant’s DTC and NSCC settlement balances are netted at the legal entity level.

    The example below illustrates how cross endorsement introduces settlement efficiencies into the end-of-day settlement process:


    Upon the completion of cross endorsement, a final net debit or credit balance is determined for each participant. Debits reflect a participant’s obligation to pay DTC while credits reflect an obligation to pay the participant.

    Each participant must choose a settling bank that is also a DTC participant with access to the Fedwire system and NSS to act on its behalf when settling with DTC. DTC further reduces money transfers by netting participant balances at the settling bank level, which allows a settling bank to settle for multiple participants via a single Fedwire instruction rather than settling each individual participant balance.

    The example below illustrates how netting at the settling bank level introduces additional settlement efficiencies into end-of-day settlement:

    Settling Bank XYZ

    Settling banks, acting on behalf of participants, acknowledge or refuse to settle participant balances. Upon acknowledgement from all settling banks, DTC collects and disburses settling bank balances through the Federal Reserve’s NSS, which directly posts debits and credits to settling bank accounts.

  • For More Information

    To request additional information, please click here.

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