What differentiates RTGS providers from DNS systems?

RTGS, or Real-Time Gross Settlement systems, are distinguished by their functioning and regulatory framework. The correct choice highlights that RTGS systems are under central bank oversight. This oversight is crucial because it ensures the reliability and stability of the payment system, as central banks typically design RTGS systems to facilitate large-value payments in real-time, reducing the risk of systemic failures.

RTGS systems operate by settling payments on a gross basis, meaning each transaction is settled individually as it occurs, without the batching process employed by other systems. The involvement of central banks not only adds a layer of trust but also helps manage monetary policy and liquidity within the financial system.

In contrast, other types of systems, such as DNS (Deferred Net Settlement) systems, do not operate under the same direct oversight or mechanisms. DNS systems often batch transactions and settle them at scheduled intervals, which can introduce more risks compared to the immediate settlement provided by RTGS systems.

The other options do not accurately capture the primary differentiator between RTGS and DNS systems, particularly regarding ownership, processing characteristics, or transaction value categorization. While some RTGS providers may be operated by private entities, the defining feature here is the oversight by central banks, which is central to the understanding of RTGS functionality