In all the countries which participated in this report, there is no simultaneous DVP. A few however, like Sri Lanka and Mauritius do have "same-day" funds. This does to a certain extent eliminate principal risk and offers the best possibilities for DVP.

A study group, set up by the Committee on Payment and Settlement System, in its report "Delivery Versus Payment in Securities Settlement Systems", identified three broad structural approaches to achieving DVP:

• Model 1: Simultaneous finality of securities transfer and cash transfer. Examples of model1 systems include Euroclear, Fedwire and Cedel. This model is best in terms of risk control but it does require a credit provider.

• Model 2: Final transfer of securities prior to final cash transfer but against guarantee by reliable banks. An example of this is the Central Gilts Office in the UK. This is effective in markets with great financial strength.

• Model 3: Provisional transfer of securities, which becomes final when final cash transfer is made. If the cash is not paid, the securities credit will be reversed. Finality is conditional on information as to the availability of funds for purposes of settlement.

There is no unwinding risk in DVPmodels1 and 2 as securities transfers are final immediately when made. There is, however, a risk of unwind in DVPmodel3 if cash payment is not made.

Most of the countries which participated in the report fall under the Model3 category, whereby the transfer of securities is initiated from the seller's account and either deposited in the buyer's account on a provisional basis or held pending final funds settlement. However, the clearing house in the said countries provide an implicit guarantee for the payment of the securities. In the event of failure, the clearing house will substitute itself as a counterparty, meeting the defaulting party's obligations to the other. There are pros and cons to the concept of a central guarantor (see Appendix1 for further elaboration on this subject).

An alternative to a central risk taker is reliance on bank cash and securities lending system. Banks that provide credit facilities to brokers would give credit on a commercial basis depending on the credit worthiness of each stockbroker. The banks would, therefore, have the responsibility to monitor the brokers' risks in making a decision as to whether to extend credit or not and as to the amount of the credit to be extended.

With regards to securities lending, this would involve the lending of securities on a fully collateralised basis, generating a specified return for the lender. This would prevent or address failed trades. It should, however, be seen as a last resort measure and not as a normal part of the clearing and settlement process. Participants whose transactions would otherwise fail due to a lack of security position may borrow the securities to complete their obligations. There needs to be close regulatory supervision to ensure that securities lending is not a facility that is abused for speculative purposes. The difficulties in regulating such securities lending may be the reason why not all of the countries participating in the report permit or practice the activity.