Net Settlement

Net Settlement

In the context of payments systems, net settlement refers to the way the clearinghouse settles payments at the end of day. Rather than crediting and debiting gross payments between network participants in real time, it nets debits and credits and transfers net amounts at the end of each business day. UK employers have been able to grant share options on a net settlement basis.They grant fewer shares (minimising shareholder dilution) and make a parallel cash payment to tax authorities in an amount equivalent to the income tax and National Insurance that would have been payable had the employee exercised the full complement of shares and sold.

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