When applied in the context of a payment system, "zero hour rules" make all transactions by a bankrupt participant void from the start of the day of the bankruptcy. In a real-time gross settlement system, the effect could be to reverse payments that have apparently already been settled and were thought to be final. In a system with deferred net settlement, such a rule could cause the netting of all transactions to be unwound. This would entail a recalculation of all net positions and could cause significant changes to participants' balances. In either case, there could be systemic consequences.[1]
When applied in the context of a payment system, "zero hour rules" make all transactions by a bankrupt participant void from the start of the day of the bankruptcy. In a real-time gross settlement system, the effect could be to reverse payments that have apparently already been settled and were thought to be final. In a system with deferred net settlement, such a rule could cause the netting of all transactions to be unwound. This would entail a recalculation of all net positions and could cause significant changes to participants' balances. In either case, there could be systemic consequences.[1]