Gross Settlement

Gross settlement is a system where each transaction is settled individually, without netting. Every trade requires a full transfer of assets between the buyer and the seller.

While this eliminates the counterparty risk associated with the netting process, it requires significantly more liquidity. Real-Time Gross Settlement systems are used for large-value transactions where the immediate and final transfer of funds is critical.

In the context of some crypto protocols, gross settlement is the default due to the lack of a central clearing house. It provides absolute certainty but is less capital-efficient than net settlement.

Understanding the trade-offs between gross and net settlement is key to designing efficient market structures.