Ensuring settlement certainty

Within the Nexus payment flow, a payment is cleared and settled in both Source IPS and the Destination IPS sequentially and independently.

Nexus allows a payment to flow through IPS with any combination of domestic settlement models, including deferred net settlement or real time gross settlement. The Source IPS and Destination IPS can have different settlement models and different settlement times.

Ensuring settlement certainty

Each IPSO must ensure that any transaction committed to the Nexus Gateway will be honoured in all scenarios (including a default of an involved participant).

For each specific Nexus payment:

• the Source IPS must ensure settlement between the Source PSP and Source SAP can be performed before sending a pacs.008 payment instruction to the Nexus gateway.

• the Destination IPS must ensure settlement between the Destination SAP and Destination PSP can be performed before sending a positive pacs.002 payment status report to the Nexus Gateway. This includes any scenario, including (for example) a default of the Destination SAP or Destination PSP.

The mechanism to meet these requirements is up to the IPSO; Nexus does not prescribe a specific model or mechanism. Settlement certainty can be achieved for example by:

• settling the transaction domestically before sending the transaction to Nexus (the 4-step settlement model),

• ensuring irrevocability in the system and relying on prefunding by participants, or

• relying on a loss sharing agreement between participants.

In the case where a payment fails (whether as a result of a decision by the Source SAP, Nexus, Destination SAP, Destination IPS or the Destination PSP):

• The Source IPS must ensure that, in the case the transaction is rejected by the Destination IPS (including by the Destination SAP or Destination PSP), the Source IPS is able to process the reject and reverse any transfer between the Source PSP and Source SAP.

• The Source IPS must ensure the reject will be processed, even in the case of a default or lack of funds at the Source SAP. This is particularly relevant in the scenario where the Source IPS uses a 4-step settlement model and the funds have already been transferred from the Source PSP to the Source SAP.

In Nexus transactions, the resulting consequences and obligations from these settlement certainty requirements are documented in the table below.

Consequences and obligations	4-step settlement in Source IPS	5-step settlement in Source IPS
4-step settlement in Destination IPS	Source IPS must ensure rejects can be handled correctly Destination IPS must ensure transactions cannot be rejected by D-SAP or D-PSP after the payment confirmation has been given to the Nexus Gateway	Source IPS must ensure settlement is guaranteed before sending the payment instruction to the Nexus Gateway Destination IPS must ensure transactions cannot be rejected by D-SAP or D-PSP after confirmation has been given to the Nexus Gateway
5-step settlement in Destination IPS	Source IPS must ensure rejects can be handled correctly Destination IPS confirms to the Nexus Gateway after successful settlement in its system (after confirmation of the Destination PSP)	Source IPS must ensure settlement is guaranteed before sending the transaction to the Nexus Gateway Destination IPS confirms to the Nexus Gateway after successful settlement in its system (after confirmation of the Destination PSP)