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One of the ways to regulate liquidity in gross settlement systems is the formation of queues of unexecuted payment orders (queuing). If a settlement participant does not have money in the account and cannot use a loan, his payment order will be placed in a queue that can be stored in the central processor of the system (the so-called "centralized queue") or in the computer system of the bank participating in settlements ("internal queue") ... When the money is credited to the account, the order will be automatically executed.
There are different queue management schemes for faster and more efficient settlement. This optimization consists primarily in changing the order of passage of the queue. The queue can be managed either by a settlement participant (bank) or by the system operator (most often - by the central bank).
A settlement participant can:
The system operator can change the order of releasing orders from the centralized queue. The simplest queue management scheme is based on the FIFO principle (first-in first-out), that is, if there is funds on the account, the order at the head of the queue is paid first (see Table 5.1). However, strict adherence to this rule can disrupt the continuity of payments, since one large payment at the head of the queue can block the passage of other payments.
Table 5.1
Types of payment order queues in LVPS of different countries
A more complex option is called the "bypass FIFO" (bypass FIFO). It lies in the fact that if the system cannot complete the first transfer in sequence due to lack of money, then it will try to perform the next transfer. A further development of this approach is the FAFO (first-available, first-out) principle . If the first transfer in the order cannot be completed, the system enumerates all subsequent orders in the queue and withdraws the one that can be paid based on the available funds.
In recent years, more and more sophisticated optimization algorithms have been used to pay for delayed orders. In particular, programs have been developed that make it possible to search in the queues of settlement participants for such sets of payment orders that are mutually canceled. They are then settled through a set-off, which can be carried out either in the form of individual transfers or in the form of a net offset.
The simplest version of this approach is bilateral offset, when the system tries to offset the first order in the queue of bank "A" and the first order in the queue of bank "B". More complicated is the "partial bilateral offset", when the system is not limited to the first orders, but makes sets of mutually repayable payments for each pair of participants. This approach is applied in a number of systems - UTB Canadian, French P ^, German KTS5 p | Institute and a number of others.
For example, in the Italian BI-R.EE system, updated in 2003, the optimization mechanism is turned on automatically after each new payment order is received in the system or the amount of funds on the participant's current account is changed. The search is carried out in a two-way mode according to the ope-yeg-tapu principle, that is, the offset of one payment order against several counter orders. When bank "A" sends a new payment order to the system in favor of bank "B", the system checks the payments in the queue of bank "B" for their use for offset. First, the largest payment of Bank B is paid off, and then others that can be included in this payment series. All payments selected as a result of this procedure will be settled on a gross basis without netting.
Algorithms for "full multilateral" and "partial multilateral" offset have also been developed. “Full multilateral” offset resembles the settlement procedure in traditional net systems. For each participant, the optimization mechanism calculates its “virtual” net position by summing all incoming and all outgoing payments and determining the net balance of settlements. If the operating conditions of the system allow the net debit balances of participants to be cleared from the virtual payment settlement, then the offset will actually occur. If at least one position cannot be settled due to lack of funds or for another reason, the entire multilateral offset will be canceled.
In some systems, for example in RTGS plus, "partial multilateral" offset is allowed, when a suitable set of payments in the queues of counterparties is selected for a part of the payment orders standing in the queue, and they are credited multilaterally. In this case, offset can take place during the working day in a continuous mode or at discrete intervals.
The RTGS counterpayment offset options above are examples of the hybrid system designs discussed above, where real-time transfer is combined with netting to save liquidity.
There are different queue management schemes for faster and more efficient settlement. This optimization consists primarily in changing the order of passage of the queue. The queue can be managed either by a settlement participant (bank) or by the system operator (most often - by the central bank).
A settlement participant can:
- 1) recall a payment order from the queue if it interferes with the passage of other, smaller payments;
- 2) divide a large payment into several small ones, which can be performed with the available amounts on the account;
- 3) establish a scale of priorities, in connection with which more important and urgent payments will receive a higher status and will be carried out in the first place. In this case, the priorities can be changed throughout the day.
The system operator can change the order of releasing orders from the centralized queue. The simplest queue management scheme is based on the FIFO principle (first-in first-out), that is, if there is funds on the account, the order at the head of the queue is paid first (see Table 5.1). However, strict adherence to this rule can disrupt the continuity of payments, since one large payment at the head of the queue can block the passage of other payments.
Table 5.1
Types of payment order queues in LVPS of different countries
| FIFO | "Bypass" FIFO | Different levels of priority | Changing the order of orders in the queue |
| ELLIPS | ELLIPS | ELLIPS | RTGS plus |
| LVTS | PNS | TBS | BI-REL |
| PNS | BI-REL | RTGS plus | TOP |
| BI-REL | K-RIX | BI-REL | K-RIX |
| TOP | E-RIX | TOP | E-RIX |
| K.-RIX | SIC | SIC | |
| E-RIX | CHAPS Euro | CHAPS Euro | |
| SIC | CHAPS Sterling | CHAPS Sterling | |
| CHIPS | CHIPS |
A more complex option is called the "bypass FIFO" (bypass FIFO). It lies in the fact that if the system cannot complete the first transfer in sequence due to lack of money, then it will try to perform the next transfer. A further development of this approach is the FAFO (first-available, first-out) principle . If the first transfer in the order cannot be completed, the system enumerates all subsequent orders in the queue and withdraws the one that can be paid based on the available funds.
In recent years, more and more sophisticated optimization algorithms have been used to pay for delayed orders. In particular, programs have been developed that make it possible to search in the queues of settlement participants for such sets of payment orders that are mutually canceled. They are then settled through a set-off, which can be carried out either in the form of individual transfers or in the form of a net offset.
The simplest version of this approach is bilateral offset, when the system tries to offset the first order in the queue of bank "A" and the first order in the queue of bank "B". More complicated is the "partial bilateral offset", when the system is not limited to the first orders, but makes sets of mutually repayable payments for each pair of participants. This approach is applied in a number of systems - UTB Canadian, French P ^, German KTS5 p | Institute and a number of others.
For example, in the Italian BI-R.EE system, updated in 2003, the optimization mechanism is turned on automatically after each new payment order is received in the system or the amount of funds on the participant's current account is changed. The search is carried out in a two-way mode according to the ope-yeg-tapu principle, that is, the offset of one payment order against several counter orders. When bank "A" sends a new payment order to the system in favor of bank "B", the system checks the payments in the queue of bank "B" for their use for offset. First, the largest payment of Bank B is paid off, and then others that can be included in this payment series. All payments selected as a result of this procedure will be settled on a gross basis without netting.
Algorithms for "full multilateral" and "partial multilateral" offset have also been developed. “Full multilateral” offset resembles the settlement procedure in traditional net systems. For each participant, the optimization mechanism calculates its “virtual” net position by summing all incoming and all outgoing payments and determining the net balance of settlements. If the operating conditions of the system allow the net debit balances of participants to be cleared from the virtual payment settlement, then the offset will actually occur. If at least one position cannot be settled due to lack of funds or for another reason, the entire multilateral offset will be canceled.
In some systems, for example in RTGS plus, "partial multilateral" offset is allowed, when a suitable set of payments in the queues of counterparties is selected for a part of the payment orders standing in the queue, and they are credited multilaterally. In this case, offset can take place during the working day in a continuous mode or at discrete intervals.
The RTGS counterpayment offset options above are examples of the hybrid system designs discussed above, where real-time transfer is combined with netting to save liquidity.
