ZagTrader

Settlement transaction types

PAIR: Pair-Off

Written and maintained by ZagTrader. Last reviewed . How this page is sourced and checked

PAIR marks a pair-off: the instruction is netted against one or more earlier transactions, usually with the same counterparty, so that only the difference settles or nothing moves at all.

Code
PAIR

What PAIR means

Pair-offs are common in fixed income and in the US agency mortgage TBA market: a firm buys a quantity for a settlement date and later sells it back to the same dealer for the same date. Instead of a receipt and a delivery of the full quantity, the trades are paired off and only the net securities or the price difference settles. PAIR tells the account servicer that the instruction is part of such a pairing.

The paired quantity can be given with :36B::PAIR in sequence A1, alongside the references of the trades being paired. Citi’s field 22F guide requires PAIR for all pair-off transactions in one of its regions. For repos the same idea is flagged differently, with :22F::REPT//PAIR in sequence E.

Compare TURN, where both trades settle in full with different brokers, and NETT, used for netting of instructions more generally, for example by a central counterparty.

When you see it

  • On MT541 or MT543 instructions for the residual quantity after a pair-off, linked to the original trades.
  • In US custody, where pair-offs with the same dealer are routine for TBA and other fixed income positions.

What to do next

  • Link every instruction in the pair-off and state the paired quantity. If the counterparty treats the trades as separate settlements, you will see unmatched or failing legs for the full quantity.
  • In T2S markets the transaction type is not one of the matching fields, so the code on your instruction does not stop it matching. Some markets do match on it: Clearstream states that for KDPW (Poland) the SETR indicator is a mandatory matching criterion. There, agree the code with your counterparty, or both instructions stay unmatched with reason SETR (see unmatched settlement instructions).

Where it appears in MT and ISO 20022

MT (ISO 15022)

  • MT540, MT541, MT542 and MT543: sequence E (SETDET), field 22F, :22F::SETR//PAIR. The SETR qualifier is mandatory, so every instruction carries one code (format :4!c/[8c]/4!c; with a data source scheme a proprietary code may be sent instead).
  • Repeated in the confirmations MT544, MT545, MT546 and MT547 (sequence E, :22F::SETR//PAIR) and in the MT548 status advice (sequence B, where SETR is mandatory when the sequence is present).
  • Optional in the statements: MT536 subsequence B1a2 and MT537 subsequences B2b and C2.

MX (ISO 20022)

  • sese.023: SttlmParams/SctiesTxTp/Cd = PAIR (code list SecuritiesTransactionType23Code, unchanged in sese.023.001.09 to .013). SttlmParams/SctiesTxTp/Prtry carries a proprietary code instead.
  • Echoed in sese.024 at TxDtls/SttlmParams/SctiesTxTp/Cd and in sese.025 at SttlmParams/SctiesTxTp/Cd.
  • sese.023 gives the paired quantity in Lnkgs/LkdQty/PairdOffQty.