Settlement and processing cycles

STEP2 SCT is fully compliant with the SCT Scheme Rulebook and Implementation Guidelines of the EPC. It processes high volume of mass retail payments sent to the system by means of files through a secure network. Participation in STEP2 SCT, i.e. being able to send and receive files from the service, is restricted to banks operating in SEPA.

In addition to the technical processing features, business practices have been introduced in relation to the handling of payments in a wider, "end-to-end" approach.

Clearing and Settlement cycle arrangements

STEP2 SCT provides the following clearing and settlement cycle arrangements:

  • Five day-time cycles: Participants are free to send payments for settlement during any of these five cycles but must be ready to process incoming payments during each of them. The sending cut-off of the last settlement cycle in the day stands at 16:00 CET.
  • Two optional night-time cycles: Participation is on a closed user group basis, i.e. any bank wishing to send or receive payments during either or both of the optional cycles has to register separately for each optional cycle.
  • Possibility to request additional cycles: Any community interested in additional cycles may enquire about their implementation in the STEP2 SCT Service.

Functioning of the clearing and settlement process

Clearing and settlement phases

Each payment cycle can be divided into three standard phases:

  • Validation phase: From the opening time of the cycle until the sending cut-off time, incoming and warehoused payments for this cycle are validated and stored.
  • Settlement phase: From settlement opening time until settlement cut-off time, STEP2 calculates what each direct participant owes to every other direct participant, and sends the results to the multilateral netting module for settlement in TARGET2.
  • Output phase: When settlement has been completed, STEP2 delivers the payments and reconciliation reports to the direct participants.

Settlement of STEP2 in TARGET2

Participating banks settle their STEP2 obligations by paying a net calculated amount in TARGET2. STEP2 first creates bilateral gross obligations and reports them to the banks, calculates the multilateral net positions and sends these multilateral net amounts to TARGET2 using the Ancillary System Interface.

Direct participants in the STEP2 SEPA Services have the possibility to request MT 900 / MT 910 and MT 940 / MT 950 messages from TARGET2 for reconciliation purposes.