Please note that the STEP2-T System is transitioning to continuous gross settlement (CGS). The new CGS mechanism and the existing cycle-based settlement model will co-exist until July 2022 to enable a phased, risk-minimising migration of the large STEP2 user community. As of July 2022, the cycle-based mechanism will no longer be supported by the STEP2-T System. Click for more information about the continuous gross settlement.

Cycle-based settlement

Key features

Under cycle-based mechanism, the STEP2-T clearing and settlement process is operational on all TARGET days and offers the following key features to its participants: 

  • multiple intra-day cycles and optional night-time cycles for SEPA Credit Transfers 
  • settlement of the STEP2 SCT and SDD cycles on a bilateral gross basis with multilateral net calculated positions in TARGET2 
  • settlement before delivery for SCTs – by strictly applying this principle, STEP2 SCT enables participants to book onto their customers’ accounts any payments received without any credit risk 
  • payment warehousing and SCT cycle scheduling functionality 
  • monitoring facilities via the Direct Participant Web Station, which provides real-time information on liquidity positions, on the status of files or payments in the system, routing table information and much more 

How the clearing and settlement process works

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 participant’s position is and sends the results to the TARGET2 Interface for settlement in TARGET2.
  • Output phase: when settlement has been completed, STEP2 delivers the payments and reconciliation reports to the participants.


Participants settle their STEP2 positions by paying a net calculated amount in TARGET2. To ensure optimal efficiency for the system, STEP2 first creates bilateral gross positions and reports them to the participants, calculates the multilateral net positions and sends these amounts to TARGET2 using the Ancillary System Interface. 

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.

Measures supporting smooth settlement

A number of measures and procedures are in place to ensure that the STEP2 SEPA Services settlement is carried out in a smooth manner, even under exceptional circumstances: 

  • Pre-settlement report: after each sending cut-off for a settlement cycle, STEP2 sends to the participants the liquidity positions for settlement in the upcoming cycle.
  • Information period: apart from the possibility to monitor their real-time settlement position via the DPWS, participants have a 15-minute-long information period before each settlement for liquidity management reasons. This information period allows the participants to check whether they are short or long with regard to their STEP2 position and to take the necessary actions. The start of the information period is notified to the settlement banks in TARGET2 by an ICM Broadcast. 
  • Operational monitoring: in the rare case that a participant in the STEP2 SEPA Services might be lacking liquidity at the time of settlement, EBA CLEARING is in a position to detect this rapidly through its standard operational monitoring and can contact the participant to ensure it tops up its RTGS account in order to prevent any delay in the settlement and distribution of its output files. 
  • Re-submission of payments in STEP2 SCT: if a participant lacks liquidity in any of the first four day-time cycles, its payments are withdrawn from that particular cycle, so that settlement can take place normally for the remaining participants. The payments withdrawn are automatically resubmitted to the next cycle, with the exception of the last cycle of the business day. Participants will be notified of payments moved to a subsequent cycle by means of a CCF report.