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The Law of Financial Advice, Investment Management, and Trading by van Setten, Lodewijk (14th February 2019)

6 Trading and Settlement

From: The Law of Financial Advice, Investment Management, and Trading

Lodewijk van Setten

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2015. All Rights Reserved.date: 17 November 2019

Subject(s):
Capital markets — Settlement — Investment business — Insolvency set-off

This chapter discusses the common organisational and structural aspects of trading venues, the responsibility of investment firms that execute trades, and the operation of settlement systems. In particular, it examines those protective features that mitigate settlement finality risks, that is, the risk that a settlement may not become final due to adverse claims or insolvency. The chapter first considers the relevant provisions of Markets in Financial Instruments Directive (MiFID) II regarding trading venues and trading obligations before describing the structure of settlement cycles, with a focus on how a cash (credit) transfer and a book-entry securities (credit) transfer operate. It then explains the importance of settlement finality and compares adverse claims sourced in law or equity with adverse claims sourced in the Insolvency Act 1986. Finally, it analyses the provisions of the Settlement Finality Directive for the protection of payment and settlement systems from participant insolvency.

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