Quick Answer
Continuous net settlement (CNS) is a settlement process that continuously nets transactions into a resulting delivery or payment obligation. Instead of treating offsetting transactions as separate settlement obligations, CNS produces a net settlement obligation that identifies what must ultimately be delivered or paid.
Netting changes the settlement focus from each individual offsetting trade to the remaining obligation.
Netting Settlement Obligations
- Continuous net settlement (CNS): A settlement process that nets settlement obligations on a continuous basis.
- Net settlement obligation: The resulting delivery or payment obligation after transactions are netted.
- Offsetting transactions → continuous netting → one resulting delivery or payment obligation.
Think of it this way: If transactions create both an obligation to deliver and an offsetting obligation to receive the same security, CNS focuses on what remains after the offsetting amounts are netted.
Exam Tip: Gotchas
- CNS focuses on the net settlement obligation. It does not require each offsetting transaction to be handled as its own delivery-and-payment obligation.