IDEAS home Printed from https://ideas.repec.org/p/wpa/wuwpdc/0405005.html
   My bibliography  Save this paper

Restructuring securities systems processing – a blue print proposal for real-time/t+0 processing

Author

Listed:
  • Harry Leinonen

    (Bank of Finland)

Abstract

Securities settlement is an area, where nobody seems to be content with the current international processing systems, but neither has a proposal for improvement emerged that has attracted common support. This paper describes a possible solution based on an international, harmonised and simplified institutional structure operating in an open real-time network structure. All deals are settled in immediate, t+0, real-time, which means that all assets and funds are delivered immediately and thereby removing settlement risk. Inter-custodian delivery problems of securities will disappear, because only securities available on investors’ accounts can be settled, which continuously equals the amount on the omnibus-accounts. This will also take out the risks related to ‘naked’ short selling, because in most cases investors have to make securities and funds available before trading. This may divide the current market in a spot t+0 and a short term t+3 futures’ market. Corporate actions can be organised in coordination and executed in synchronisation through the infrastructure network in which all custodians and registrars/CSDs participate. The paper describes the concrete new methods required (eg international custody account number system, ICAN, and DVP-codes for matching) also the probable impact of immediate real-time settlement on trading patterns, liquidity issues and risk containment. These are all areas, where the proposed new infrastructural solutions would bring benefits to the users, mainly faster/immediate delivery, less risks, lower processing costs, more competition and more efficient processing of corporate actions. Custodians’ liquidity management will need to focus on the sufficiency of the real-time balance of settlement money, which might be more or less strained compared to the current situation depending on the off- setting patterns of incoming and outgoing settlements during the day. International implementation will require coordination and engagement by key players.

Suggested Citation

  • Harry Leinonen, 2004. "Restructuring securities systems processing – a blue print proposal for real-time/t+0 processing," Development and Comp Systems 0405005, EconWPA.
  • Handle: RePEc:wpa:wuwpdc:0405005
    Note: Type of Document - pdf
    as

    Download full text from publisher

    File URL: http://econwpa.repec.org/eps/dev/papers/0405/0405005.pdf
    Download Restriction: no

    More about this item

    Keywords

    Securities settlement; securities settlement infrastructure; DVP processing; securities trading interfaces;

    JEL classification:

    • O - Economic Development, Innovation, Technological Change, and Growth
    • P - Economic Systems

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpdc:0405005. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA). General contact details of provider: http://econwpa.repec.org .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.