Securities Settlement and CSDs: DvP, JASDEC and T+1

When you post bonds as collateral for derivatives, or deliver government bonds at the final settlement of JGB futures, a securities settlement mechanism is involved. The institution whose accounts carry out the delivery depends on the type of security.

Securities settlement systems and the role of CSDs

A securities settlement system moves and settles securities by book-entry transfer under rules common to its participants¹. A transfer of securities can be free of payment or can be linked to a payment¹.

A central securities depository (CSD) provides securities accounts, holds securities centrally, and offers asset services such as the administration of corporate actions and redemptions². It also helps ensure that securities are not issued or destroyed accidentally or fraudulently and that their details are not altered². Securities can be held in immobilized physical form or in dematerialized form, as electronic records only². In many countries, a CSD also operates a securities settlement system³.

What a CSD does differs by jurisdiction. Jurisdictions differ on whether they allow direct holding, in which the CSD or the issuer knows each investor's account, or indirect holding, in which investors are visible only at the level of intermediaries such as custodians².

How DvP prevents one-sided settlement

Delivery versus payment (DvP) is a mechanism under which securities are transferred only if payment is made¹.

Consider a hypothetical example in which Securities Firm E sells a bond to Securities Firm F for 9.9 billion yen. Without DvP, if Securities Firm E delivers the bond first and Securities Firm F fails before paying, Securities Firm E has delivered the bond and cannot receive the 9.9 billion yen. This is principal risk, which arises when only one of two linked obligations is settled, and the loss can reach the full amount of the trade⁴. Under DvP, the bond moves only if Securities Firm F pays⁵. If Securities Firm F cannot pay, the bond does not move, so Securities Firm E does not lose the bond.

Figure description

The bond moves from the seller, Firm E, through the system to the buyer, Firm F, and the payment moves the other way, from Firm F through the system to Firm E. The settlement system does not settle the bond unless the payment is also settled, and the reverse, so it avoids a state in which only one side is settled. The figure simplifies the setup to one system that handles both the bond and the payment; in some setups the funds are transferred at a settlement bank instead.

The international Principles for Financial Market Infrastructures (PFMI) recommend that systems that settle an exchange of value eliminate principal risk through mechanisms such as DvP⁵. Even with DvP, trades that did not settle, for example because payment was not made, remain unsettled. For such trades, the seller can lose gains it expected to realize, and the parties can incur the cost of replacing the original contract at market prices⁴. DvP removes principal risk, but it does not remove the risk of systemic disruption, such as an uneven distribution of liquidity after a participant defaults⁶.

DvP does not require the two obligations to be performed at the same instant. For example, when a securities settlement system holds no funds accounts, it first blocks the seller's securities, confirms that the transfer of funds at the settlement bank that handles funds is complete, and only then delivers the securities to the buyer⁷. The PFMI recommend minimizing the time from blocking to delivery and keeping the blocked securities from becoming subject to third-party claims⁷.

The three models of DvP

DvP has Models 1 to 3, depending on whether securities and funds are each settled one obligation at a time or settled net, by offsetting payments and receipts⁸.

Model 3 settles both securities and funds net, at the same time⁸. On top of DvP, using Model 1, which settles gross, one obligation at a time, further reduces credit exposures and liquidity exposures among participants and between participants and the securities settlement system⁸.

In Models 2 and 3, which settle net, the settlement system or a participant may explicitly guarantee that settlement will be performed. The party that gives the guarantee is in effect extending intraday credit⁸. Without a guarantee, if a participant defaults, the participants bear settlement risk to one another⁸.

In every model, legal, contractual, technical, and risk management frameworks must ensure that one settlement is executed only if the linked settlement becomes final, meaning confirmed and irrevocable⁹. Funds-side settlement is covered on the Payment Systems: RTGS, BOJ-NET and Correspondent Banking page.

JGB settlement, JASDEC, and clearing houses in Japan

The Bank of Japan operates the JGB book-entry transfer system as the book-entry transfer institution for government bonds¹⁰. Government bonds are delivered by book-entry transfers between the accounts of system participants. The structure is tiered: the Bank of Japan holds accounts for banks, financial instruments business operators, and others, and participants hold accounts for their customers¹⁰. Rights in JGBs are determined by the entry in the transfer account book, and a transfer takes effect when the entry is made in the transferee's account¹¹.

JGB transfers are processed on the JGB services side of the Bank of Japan Financial Network System (BOJ-NET), and funds are settled by transfers between current accounts at the Bank of Japan on the current account side¹². The Bank of Japan provides DvP settlement of JGBs by linking each funds transfer on the current account side to each JGB transfer on the JGB services side, so that neither takes place unless the other does¹⁰. The JGB services side is a real-time gross settlement system that checks balances and settles each transfer immediately, one at a time¹⁰.

The Japan Securities Depository Center (JASDEC) is designated by the government as a book-entry transfer institution under the Act on Book-Entry Transfer of Corporate Bonds and Shares¹³ It handles the book-entry transfer of dematerialized securities¹³. These include shares, public bonds other than JGBs, corporate bonds, short-term corporate bonds (electronic commercial paper), and investment trusts¹³. JASDEC is a CSD that operates a securities settlement system for the safekeeping and book-entry transfer of shares and similar securities, short-term corporate bonds, general corporate bonds, and investment trusts¹⁴. It links that system to the current account side of BOJ-NET to provide DvP settlement¹⁴.

JASDEC DVP Clearing Corporation (JDCC) is a wholly owned subsidiary of JASDEC and a clearing house (CCP) that clears the book-entry transfers of share transactions and similar transactions between financial institutions conducted outside exchanges¹⁵. The Japan Securities Clearing Corporation (JSCC) clears over-the-counter JGB transactions¹⁶. As of September 2024, use of clearing houses has grown in JGB trading, and transactions that previously did not use DvP have moved to DvP settlement through a clearing house¹⁷.

Major CSDs abroad

Major CSDs abroad include the following.

Through its links to national CSDs, Euroclear Bank also acts as a gateway for participants to foreign securities markets. An ICSD in this role is called an investor ICSD, and the CSD on the foreign side is called an issuer CSD¹⁸.

Euroclear Bank and Clearstream Banking in Luxembourg jointly perform the role of the issuer-side CSD (the notary function) for Eurobonds, which are international bonds issued in a currency other than that of the issuer's country¹⁸.

DTC safekeeps securities for financial institutions, custodians, and brokers, and provides settlement and asset services such as corporate actions²⁰.

Securities settlement in derivatives transactions

Some settlements move only securities, with no funds paid in return, such as posting collateral or moving securities between accounts²¹. The operational side of exchanging collateral is covered on the Collateral Operations page.

JGB futures trade a notional standard bond that does not exist, so the final settlement delivers actual government bonds called deliverable bonds²². The delivery is made by transfers between accounts in the JGB book-entry transfer system¹⁰.

Dates of the shorter settlement cycle

The standard settlement cycle is written as the number of business days from the trade date to the settlement date, such as T+1 (one business day after the trade date) or T+2 (two business days after the trade date)²³. As of October 2026, the dates of the move to a shorter settlement cycle are as follows.

In the United States, the Securities and Exchange Commission (SEC) adopted a final rule on February 15, 2023, that shortened the standard settlement cycle for most transactions by US broker-dealers from T+2 to T+1²³. Security-based swaps are excluded from this T+1 provision²⁹. The EU regulation requires the intended settlement date of securities transactions executed on trading venues to fall no later than the first business day after the trade. Certain transactions, such as securities financing transactions, are excepted²⁷.

Notes

1. CPSS and IOSCO, "金融市場インフラのための原則" (external site) (Principles for financial market infrastructures; provisional Japanese translation, April 2012), paragraph 1.12, page 11 (in Japanese). ↩ ↩² ↩³

2. The same document (external site), paragraph 1.11 and footnote 8, pages 10–11. ↩ ↩² ↩³ ↩⁴

3. The same document (external site), end of paragraph 1.11, page 11. ↩

4. The same document (external site), paragraph 3.12.1, page 107. ↩ ↩²

5. The same document (external site), paragraph 3.12.2, pages 107–108. ↩ ↩²

6. The same document (external site), footnote 112 to paragraph 3.12.1, page 107. ↩

7. The same document (external site), paragraph 3.12.4, pages 108–109. ↩ ↩²

8. The same document (external site), paragraphs 3.4.9 and 3.4.11, pages 53–54. ↩ ↩² ↩³ ↩⁴ ↩⁵

9. The same document (external site), paragraph 3.12.3, page 108. ↩

10. Bank of Japan, "日本銀行が運営する国債振替決済制度に関する情報開示" (external site) (July 31, 2025), sections 3-1 and 1-3, pages 7–8 and 4 (in Japanese). ↩ ↩² ↩³ ↩⁴ ↩⁵

11. Bank of Japan, "日本銀行が運営する国債振替決済制度に関する情報開示" (external site) (July 31, 2025), page 13 (in Japanese). ↩

12. Bank of Japan, "決済システムレポート 2024" (external site) (Payment and Settlement Systems Report 2024; September 2024), page 9 (in Japanese). ↩

13. Japan Securities Depository Center, "証券保管振替機構について" (external site) (About JASDEC), opening description (in Japanese). ↩ ↩² ↩³

14. Bank of Japan, "決済システムレポート 2024" (external site) (September 2024), page 14 (in Japanese). ↩ ↩²

15. Bank of Japan, "決済システムレポート 2024" (external site) (September 2024), page 15 (in Japanese). ↩

16. Bank of Japan, "決済システムレポート 2024" (external site) (September 2024), page 16 (JSCC section) (in Japanese). ↩

17. Bank of Japan, "決済システムレポート 2024" (external site) (September 2024), page 10 (BOJ-NET JGB services section) (in Japanese). ↩

18. National Bank of Belgium, "Securities clearing, settlement and custody" (external site) (Financial Market Infrastructures and Payment Services Report 2026), section 2.2, pages 20–22. ↩ ↩² ↩³

19. Clearstream, "Asset services overview" (external site), opening description. ↩

20. DTCC, "DTCC Central Securities Depository Subsidiary Surpasses $100 Trillion in Assets Under Custody, Marking Historic Milestone" (external site) (June 18, 2025), second paragraph of the text. ↩ ↩²

21. CPSS and IOSCO, "金融市場インフラのための原則" (external site) (Principles for financial market infrastructures; provisional Japanese translation, April 2012), footnote 111 to paragraph 3.12.1, page 107 (in Japanese). ↩

22. Japan Exchange Group, "商品概要（国債（JGB）先物）" (external site) (Product overview: JGB futures), "商品概要" (in Japanese). ↩

23. SEC, "Shortening the Securities Transaction Settlement Cycle" (external site), 88 FR 13872, at 13872 (Summary). The adoption date is "Dated: February 15, 2023" at the end of the document (page 13954). ↩ ↩²

24. Bank of Japan, "決済システムレポート 2024" (external site) (September 2024), page 9 (in Japanese). ↩ ↩² ↩³

25. CDS, "T+1 Is Here: Transforming Canadian Capital Markets" (external site), "Seamless Transition to T+1" and "Global Alignment". ↩

26. SEC, "Shortening the Securities Transaction Settlement Cycle" (external site), 88 FR 13872, at 13916–13918 (Part VII.A). ↩

27. European Parliament, "Securities settlement in the EU and central securities depositories (CSDs)" (external site) (2025/0022(COD)), "CONTENT", "ENTRY INTO FORCE", and "APPLICATION". ↩ ↩²

28. HM Treasury, "Policy note – Mandating T+1 settlement in the UK" (external site) (updated November 20, 2025), "Introduction" and "Next steps". ↩

29. SEC, "Shortening the Securities Transaction Settlement Cycle" (external site), 88 FR 13872, at 13883 (Part II.C.3). ↩

30. SEC, "Shortening the Securities Transaction Settlement Cycle" (external site), 88 FR 13872, at 13872 (Summary) and 13890–13891 (Part III.C). ↩ ↩²