The hidden cost of waiting for settlement

The true cost of slow financial transaction settlement

Why traditional settlement still takes days

Financial transactions usually take days to finalize. The first reason for this is the legacy of batch task processing. The other main reason is that every transaction involves several intermediaries, each with their own timeline: add to these the different end-of-day cutoffs and netting windows and you’ve got a clunky and slow system. That’s not even counting time zones, holidays, manual handoffs, and reconciliation or failures delaying finality.

This is business as usual for financial systems today. It really shouldn’t be.

Capital trapped in transit is a waste of resources. In 2024, DTCC's clearing fund dropped by $3 billion (23%) within three months of T+1 implementation compared to T+2: that capital buffer can now be deployed and invested.

Late settlement also creates counterparty and market risk: exposure grows with every hour before settlement as prices keep moving. Settlement failures have cost the industry an estimated $1 trillion over the past decade, while instant onchain settlement supported by cryptographic proofs drastically reduce that risk.

Finally, having capital trapped in transit creates operational drag: institutions need to monitor and chase pending trades, to handle exceptions for timing mismatches, to create huge capital buffers following the risk mitigation regulations.

The problem with overnight borrowing for intraday needs

Let’s take the concrete example of a broker-dealer that faces a cash shortfall at 10am. They need to cover a $500 million position deficit that will resolve by 2pm, so they enter an overnight repo: selling US Treasury securities with an agreement to repurchase them the next morning. The US repo market averaged $12.6 trillion daily in Q3 2025.

When the dealer agrees to this repo, here’s what happens:

• The dealer pays overnight interest on the full $500 million, even though they only needed that amount for four hours, and their collateral is locked for 18 more hours once the need has been met.
• The cash lender earns overnight interest, but their capital is tied up until settlement the next morning.

On top of everything else, both parties face counterparty risk overnight for a problem that was solved the day before.

If that overnight repo on $500M is at a 5.3% annualized interest rate, the dealer paid $73,000 in interest for one single night; with instant settlement, they’d have paid 4 hours, closer to $12,000. Meanwhile, $500M in Treasuries were locked as collateral for a full day.

Multiply this locked collateral and lost interest by thousands of transactions: this is the true cost of slow transaction settlement.

Using instant settlement to solve needs

What instant settlement enables

Traditional settlement infrastructure can’t handle intraday finality: repos clear twice a day at best. Instant settlement changes this, moving from days to just a few seconds.

With onchain instant settlement, trade and settlement are a single atomic event. There’s no netting window, no batch dependency, and no waiting: when execution happens, the transaction is final and the money is freed up for further use and investment.

Instant settlement also reduces volatility: the move from T+2 to T+1 reduced DTCC's volatility margin component by 41%, and real-time settlement would collapse counterparty risk windows to near-zero. If trade and settlement are one single transaction, then there is no price drift, meaning fewer exceptions and failed trades.

How onchain transactions allow for instant settlement

Onchain infrastructures have one shared ledger for instant finality. All parties write to a single source of truth, eliminating the cost and delays of reconciling data silos.

The usual barrier to onchain transactions is the privacy constraint. Institutions need confidentiality on client data, positions, and flows. Until recently, blockchain didn’t allow for this level of privacy, or implemented it but made the transactions impossible to audit, breaking compliance and regulatory needs.

Modern cryptography methods, like zero-knowledge proofs, enable private settlement on shared infrastructure. This is what platforms like Hyli are building: onchain settlement with off-chain privacy through selective disclosure.

What comes next for instant settlement infrastructure

The case for instant settlement is clear. Achieving it can be harder, although solutions like Hyli are implementing simple rails. Outside of the technical aspect, moving to real-time settlement implies a shift in operating model for institutions: settlement risk will disappear, capital buffers will become efficient, and that relies on leaving the « batch mentality » to make the most of real-time operations.

Instant settlement is live and available on new and reliable blockchains like Hyli. Settlement speed is becoming a differentiator. The firms that move first will free up capital, reduce risk exposure, and operate with a structural cost advantage over competitors still waiting days for finality. And soon enough, instant settlement will become the norm.