A modern, efficient securities settlement system is a principal component of the infrastructure necessary for development of securities markets in general and the government securities market in particular. The settlement system (including depository facilities) affects the degree of confidence investors have in the market infrastructure, determines whether trading in the primary and secondary markets flows smoothly, and influences the capacity a market has to expand. The condition of the securities settlement and depository arrangements is a major direct determinant of systemic risk. The structure of the settlement system will vary with country circumstances. In developing markets for government securities, authorities should place a high priority on establishing a securities settlement infrastructure suited to country and market circumstances.