> For the complete documentation index, see [llms.txt](https://docs.xft.finance/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.xft.finance/learn/flows/payments/tch/chips.md).

# CHIPS

At start of each day, participants send $$$ to a central funding account. This $$$ pool allows CHIPS to settle faster, larger payments via multilateral netting.

* <mark style="color:purple;">Multilateral netting:</mark> Offsets obligations across the entire network
* <mark style="color:purple;">Bilateral netting:</mark> Offsets payment obligations between two banks

Bilateral netting: If your bank owes another bank $100 million, and that bank owes your bank $80 million, CHIPS nets these so only $20 million needs to move.

<mark style="color:purple;">PATENT FLOW OF FUNDS</mark>

1. Bank funds CHIPS account
2. Bank adds optional supplemental
3. Bank A pays Bank B
4. CHIPS debits A credits B
5. Uses supplemental then primary
6. Queues if limits hit
7. End of day net and settle​

{% tabs %}
{% tab title="CHIPS vs. ACH" %}

| SEGMENT            | CHIPS                           | ACH                         |
| ------------------ | ------------------------------- | --------------------------- |
| Transaction size   | High-value (typically millions) | Low to medium value         |
| Processing speed   | Same-day settlement             | 1–3 business days           |
| Settlement method  | Multilateral netting            | Batch processing            |
| Transaction volume | Lower volume, higher value      | Higher volume, lower value  |
| Cost structure     | Higher per-transaction fee      | Lower per-transaction fee   |
| Use case focus     | Large interbank transfers       | Recurring payments, payroll |
| Payment initiation | Real-time submission            | Batch file submission       |
| Reversibility      | Not reversible after settlement | Potentially reversible      |
| {% endtab %}       |                                 |                             |

{% tab title="CHIPS vs. SWIFT" %}

| SEGMENT                  | CHIPS                                  | SWIFT                          |
| ------------------------ | -------------------------------------- | ------------------------------ |
| Primary function         | Payment clearing and settlement        | Messaging network              |
| Settlement capability    | Direct settlement                      | No direct settlement           |
| Currency focus           | USD only                               | Multi-currency messaging       |
| Geographic reach         | U.S.-based, international participants | Global (200+ countries)        |
| Transaction types        | Large-value payments                   | Various financial messages     |
| Operating hours          | 9am – 6pm ET                           | 24/7 messaging                 |
| Participant requirements | Strict financial requirements          | Broader participation criteria |
| Message format           | Proprietary                            | Standardized (MT/MX formats)   |
| {% endtab %}             |                                        |                                |

{% tab title="CHIPS vs. Fedwire" %}

<table><thead><tr><th width="198">SEGMENT</th><th>CHIPS</th><th>FEDWIRE</th></tr></thead><tbody><tr><td>Ownership</td><td>Private (The Clearing House)</td><td>Public (Federal Reserve)</td></tr><tr><td>Settlement method</td><td>Multilateral netting</td><td>Real-time gross settlement</td></tr><tr><td>Speed</td><td>Same-day settlement</td><td>Immediate settlement</td></tr><tr><td>Cost</td><td>Lower fees due to netting efficiency</td><td>Higher fees per transaction</td></tr><tr><td>Liquidity requirements</td><td>Lower (10-30% of transaction value)</td><td>100% of transaction value</td></tr><tr><td>Operating hours</td><td>9am – 6pm ET</td><td>9pm (prior day) – 7pm ET</td></tr><tr><td>Transaction finality</td><td>End of day</td><td>Immediate</td></tr><tr><td>Geographic scope</td><td>International focus</td><td>Primarily domestic</td></tr></tbody></table>
{% endtab %}
{% endtabs %}

***

<mark style="color:purple;">RESOURCES</mark>

[GUIDELINES FOR FOREIGN EXCHANGE SETTLEMENT NETTING](https://www.newyorkfed.org/medialibrary/microsites/fxc/files/guidefx.pdf)

[What is Netting? How Does Netting Work?](https://www.newyorkfed.org/medialibrary/microsites/fmlg/files/Millerspresentationonnetting.pdf)

[CHIPS\_Public\_Disclosure\_01-17-2025.pdf](https://www.theclearinghouse.org/-/media/New/TCH/Documents/Payment-Systems/CHIPS_Public_Disclosure_01-17-2025.pdf)