Define ‘Atomic Settlement’ and Its Importance in Reducing Risk

Atomic settlement is a transaction where the transfer of two or more assets occurs simultaneously and conditionally: either all transfers succeed, or all fail. It eliminates 'settlement risk' (the risk that one party delivers their asset but the counterparty fails to deliver theirs).

In derivatives, this means the underlying asset or cash is exchanged for the contract obligation instantly, ensuring both parties fulfill their commitments at the same moment.