Having transmitted the necessary trade confirmations or trade matching messages, it is usual to then focus on the generation and transmission of settlement instructions.
Note that none of the actions as described up to this point will result directly in the movement of securities and cash at the custodian. Despite the fact that trade agreement has been reached on a particular trade (through trade matching, for example), securities and cash will not be exchanged unless a settlement instruction is issued to the custodian.
The term settlement instruction is a generic term used to describe the (only) mechanism by which trade settlement (the exchange of securities and cash) is initiated between seller and buyer. For each trade, an STO issues a settlement instruction to the relevant custodian (with the exception of those issued under Power of Attorney, described later in this chapter).
Note: the term custodian is used within this book as a generic term for the many types of organisation that provide custodial services, which are investigated further in Chapter 17.
Settlement instructions are normally generated by and transmitted from the STO's settlement system by a secure method, the destination being the appropriate custodian (to be selected from the range of the STO's custodians, depending upon the security that has been traded). This is ...
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