MT542 Deliver Free (Deliver Free of Payment)

When MT542 is used

An MT542 moves securities out of an account with no cash leg. Typical cases: moving a portfolio from one custodian to another, delivering collateral, returning a securities loan, or settling a trade whose cash is paid outside the CSD. Because nothing comes back, many custodians apply extra controls to free deliveries, such as authorised signatories or a call-back.

The four settlement instructions form a two-by-two grid. Direction: receive or deliver. Cash: free of payment (FOP) or against payment (DVP for a delivery, RVP for a receipt). MT540 is receive free, MT541 receive against payment, MT542 deliver free and MT543 deliver against payment. A trade settles with one instruction from each side: the seller’s custodian receives an MT543 and the buyer’s custodian an MT541, and the CSD matches the two settlement instructions they produce. A free transfer pairs an MT542 with an MT540 in the same way.

The sender is the account owner and the receiver its account servicer. The account owner can be a broker-dealer or an asset manager with an account at its custodian, or a global custodian instructing its local sub-custodian on behalf of a client. The account servicer checks the instruction, turns it into a settlement instruction in the local CSD (or the ICSD) and reports back with MT548 status messages and, once the securities move, the MT546 confirmation.

Send the instruction on trade date, as soon as the trade is confirmed or affirmed, and before the account servicer’s cut-off, which sits ahead of the CSD’s own matching and settlement deadlines. Early instructions give both sides time to fix a mismatch before the intended settlement date. In the US the standard cycle has been T+1 since May 2024, and in the EU late settlement costs cash penalties under the CSD Regulation, so an instruction sent on the evening before settlement date is often already too late. A status reason LATE (market deadline missed) or ADEA (servicer deadline missed) in the MT548 tells you the instruction arrived after a cut-off.

Field 23G says what the message does. NEWM is a new instruction. CANC cancels an instruction sent earlier: put the SEME of the original in 20C::PREV in sequence A1, and repeat the details of the original so the servicer can find it. There is no amendment function: to change a matching field, cancel and send a new instruction with a new reference. Attributes that are not matched, such as a hold or the partial settlement flag, can often be changed with an MT530 transaction processing command where the servicer supports it. PREA pre-advises an instruction that will follow; servicers that support hold and release keep it on hold until a NEWM arrives that quotes it in 20C::PREA (status reason PREA while it waits). Check your servicer’s guide, since support for PREA differs.

The settlement chain sits in sequence E1, one party per occurrence, and is the part most often wrong. PSET is the BIC of the CSD or ICSD where the securities move. REAG is the counterparty’s participant in that CSD; it is the one party (besides PSET) the network insists on. Further out come the counterparty’s intermediaries and custodian (REI1, REI2, RECU) and its client (BUYR). Your own side (DEAG and SELL) is optional: the servicer knows it from your safekeeping account. Take the counterparty’s chain from its standing settlement instructions, not from memory.

What the CSD compares. In T2S (the ECB’s matching guide) the mandatory matching fields are: payment type (free or against payment) and direction (receive or deliver), both given by the message type; the ISIN (35B); trade date (98a::TRAD); intended settlement date (98a::SETT); quantity (36B::SETT); the delivering and receiving parties (95a::DEAG and REAG); the CSD of each party (PSET or derived from the account); and, for against payment, the currency and settlement amount (19A::SETT), within a tolerance. Additional matching fields, which must match once either side fills them, are the opt-out indicator (22F::STCO//NOMC) and the cum or ex indicator (22F::TTCO with CCPN or XCPN). Optional matching fields, compared only when both sides send them, are the common reference (20C::COMM), the client of each participant and their securities accounts. Other CSDs use similar lists. When the two sides differ, the MT548 reports NMAT with a reason such as DDAT, DQUA, DSEC, DMON, DEPT or ICAG; see why an instruction is unmatched.

After sending, expect a chain of MT548 messages: accepted (PACK) or rejected (REJT), then matched (MACH) or unmatched (NMAT), then pending (PEND) or failing (PENF) with a reason such as LACK (not enough securities), and finally the MT546 confirmation on settlement. A cancellation request is answered with CAND (cancelled) or CANP (cancellation pending). The settlement lifecycle guide walks through the whole flow.

For a transfer, pick the 22F::SETR code that describes it: OWNE when the owner stays the same and the securities move between two account servicers, OWNI when they move between two accounts at the same servicer, PORT when a portfolio moves from one investment manager to another. Some markets also want 22F::BENE to say whether the beneficial owner changes.

MT542 format: sequences and fields

Rules worth knowing

• Sequences A, B, C and E are mandatory, and E1 must occur at least once. A1, B1, C1, D, E2 and F are optional. E3 (amounts) is optional in a free of payment instruction. There is no E1a: the party chain is built by repeating E1.
• Unless 22F::DBNM is present in sequence E, one E1 occurrence must contain 95a::REAG and another must contain 95a::PSET (network error E93).
• With 22F::DBNM present, an E1 occurrence must contain 95a::BUYR (E70); with 22F::DBNM//VEND, sequence F must contain 95a::VEND (D71).
• Each party qualifier (BUYR, SELL, DEAG, REAG, DECU, RECU, DEI1, DEI2, REI1, REI2, PSET in E1, the cash parties in E2, and the parties of sequence F except INVE) may appear only once in the message (E84).
• The chain must be complete going outwards: DEI2 needs DEI1, DEI1 needs DECU, DECU needs SELL; on the receiving side REI2 needs REI1, REI1 needs RECU, RECU needs BUYR (E86).
• The E1 occurrence that holds PSET cannot also hold 97a::SAFE (E52).
• When 23G is CANC, at least one A1 must be present and 20C::PREV must appear in exactly one of them (E08).
• No amount qualifier may appear in more than one E3 (E87). An exchange rate (92B::EXCH) requires 19A::RESU in the same E3 (E62).
• 36B::SETT may appear at most twice, and then once with FAMT and once with AMOR (C71). A quantity in sequence A1 (36B::PAIR or TURN) is allowed only with 22F::SETR//PAIR or TURN (C50). If 99B::TOSE is present, 99B::SETT must be present (E90).
• The rule numbers (C1, C2 and so on) differ between MT540, MT541, MT542 and MT543 and between standards releases, so search for the error code, not the rule number. Newer releases added further rules, for example on the LEI options of 94a and 95a.

MT542 example

An asset manager (FUNDGB2LXXX) moves a fund’s holding of EUR 1,000,000 nominal XS00ZAGT0021 from its old custodian (CUSTGB2LXXX) to its new one, ZagTrader Test Bank Luxembourg (ZAGTLULLXXX). Both are participants of the same ICSD (ICSDLULLXXX). This MT542 goes to the old custodian; the matching MT540 goes to the new one. The owner does not change.

{1:F01FUNDGB2LAXXX0000000000}{2:I542CUSTGB2LXXXXN}{4:
:16R:GENL
:20C::SEME//FM542261020011
:23G:NEWM
:98C::PREP//20261020160000
:16R:LINK
:20C::COMM//PTX20260117
:16S:LINK
:16S:GENL
:16R:TRADDET
:98A::TRAD//20261020
:98A::SETT//20261022
:35B:ISIN XS00ZAGT0021
ZAGTRADER DEMO FRN 2029
:16S:TRADDET
:16R:FIAC
:36B::SETT//FAMT/1000000,
:97A::SAFE//FM-SAFE-0042
:16S:FIAC
:16R:SETDET
:22F::SETR//OWNE
:22F::BENE//NBEN
:16R:SETPRTY
:95P::DEAG//CUSTGB2LXXX
:97A::SAFE//98765
:16S:SETPRTY
:16R:SETPRTY
:95P::REAG//ZAGTLULLXXX
:97A::SAFE//54321
:16S:SETPRTY
:16R:SETPRTY
:95P::PSET//ICSDLULLXXX
:16S:SETPRTY
:16S:SETDET
-}

Line by line

The new custodian receives the mirror image as an MT540 with DEAG CUSTGB2LXXX (account 98765), PSET ICSDLULLXXX, the same ISIN, dates and face amount.

All BICs, accounts and the ISIN are made up. The ISIN carries a valid check digit.

Common errors and rejects

1. Network reject: no REAG or no PSET (E93)

   Without 22F::DBNM, one E1 must name the receiving agent and another the place of settlement, or the network rejects the message. Each goes in its own E1; 97a::SAFE is not allowed next to PSET (E52).

2. Unknown safekeeping account (REJT, SAFE)

   The account in sequence C does not exist at the custodian, or is closed or blocked, which is common when a closing account is being emptied. The custodian rejects with reason SAFE.

   How to fix it

3. Wrong place of settlement or receiving agent (DEPT, ICAG)

   In a transfer the new custodian’s details often come from an onboarding form and are mistyped. A PSET that differs from the receiver’s gives DEPT, a wrong receiving agent ICAG. Confirm both with the receiving custodian before sending.

   How to fix it

4. Counterparty sent an against payment instruction

   If the receiver instructs an MT541 instead of an MT540, the payment type differs and the two never match: your instruction stays NMAT, often with CMIS (no matching instruction found). Agree on free of payment before both sides instruct.

   How to fix it

5. Wrong or unsupported SETR code (SETR)

   Using TRAD for a transfer, or OWNI when two custodians are involved, may be rejected or mis-reported for tax and fees. A code the custodian does not support gives reason SETR.

   How to fix it

6. Late instruction or securities not available (LATE, LACK)

   Instructions after the cut-off are reported with LATE or ADEA. If the securities are still blocked, on loan or pending another settlement on the settlement date, the delivery pends with LACK.

   How to fix it

MT542 in ISO 20022

In ISO 20022 one message, sese.023 (Securities Settlement Transaction Instruction), replaces all four instructions. The direction and the payment type become data elements: an MT542 is a sese.023 with SttlmTpAndAddtlParams/SctiesMvmntTp = DELI and SttlmTpAndAddtlParams/Pmt = FREE. The status message MT548 becomes sese.024, the confirmation MT546 becomes sese.025, and a cancellation is a separate message, sese.020 (Securities Transaction Cancellation Request), instead of 23G CANC.

Securities messages (category 5) were not part of the November 2025 end of MT/MX coexistence for cross-border payments, and MT540 to MT543 remain in use on FIN alongside their ISO 20022 equivalents. T2S and the CSD participants connected directly to it work in ISO 20022 (sese and semt messages); many custodians and CSDs accept both formats and translate between them. See how the securities migration differs from payments.

Related messages

• MT540Receive Free
• MT543Deliver Against Payment
• MT541Receive Against Payment
• MT546Deliver Free Confirmation
• MT548Settlement Status and Processing Advice
• MT544Receive Free Confirmation
• sese.023Securities Settlement Transaction Instruction
• sese.024Securities Settlement Transaction Status Advice
• sese.025Securities Settlement Transaction Confirmation

• From instruction to settled position: MT540-548, sese.023/024/025 and the statements that follow.
• Unmatched instruction (NMAT)

Codes used in MT542

• OWNE
• OWNI
• PORT
• COLO
• SECL
• NMAT
• LACK
• CMIS

MT542 questions

What is the difference between MT542 and MT543?

Both deliver securities. An MT543 receives cash in exchange (delivery versus payment); an MT542 delivers free of payment, with no cash moving through the settlement system.

When is an MT542 used?

For transfers of securities without a cash leg: moving a portfolio to another custodian, delivering collateral, lending or returning securities, moving holdings between accounts, or settling a trade whose cash is paid separately.

Does an MT542 need to match?

In most CSDs, yes: the receiving side sends an MT540 and the two must agree on the ISIN, quantity, dates, agents and place of settlement. Some CSDs offer delivery without matching (22F::STCO//DLWM) for specific cases.

Which SETR code should a portfolio transfer use?

OWNE when the same owner moves securities between two account servicers, OWNI when both accounts are at the same servicer, and PORT when the portfolio moves from one investment manager to another. Your custodian’s market guide may prefer one of them.

What confirms that an MT542 settled?

An MT546 deliver free confirmation, after MT548 status messages. The ISO 20022 equivalent of the instruction is sese.023 with movement type DELI and payment type FREE.