Stock exchange equity transactions are settled through a complex procedure, the first stage taking place within the relevant regulated market, and the second stage performed by the clearing houses managed by the Bank of Italy.
Transactions are settled on a deferred daily basis (by rolling settlement, ie every day transactions are settled), so that all stock exchange transactions which have been entered into on a specific day are settled after a predetermined number of days depending on the financial instrument.
The first stage of the settlement procedure is aimed at matching the single transactions entered into, and determining the balance of these transactions on a bilateral basis. It is performed by the daily verification and rectification service (servizio di riscontro e rettifica giornalieri or RRG Service), managed by Borsa Italiana, to which data relating to Stock Exchange transactions is automatically transmitted.
On the basis of the evaluation of each participant's position, the RRG Service calculates the net amount of each equity security and cash owed to it by each participant, or owed by it to each participant.
The bilateral balances are then transmitted by the RRG Service to the securities netting and settlement service (servizio di compensazione e liquidazione degli strumenti finanziari) of the Bank of Italy, which calculates the net amount of cash and securities owed to or by each participant on a multilateral basis, thus substituting the bilateral netting calculations made by the RRG Service with the multilateral netting positions calculated by it.
Securities and cash debt and/or credit positions relating to each participant and resulting from the multilateral netting are then settled by way of book entries.