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Changes in Payment Timing in Canada’s Large Value Transfer System

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  • Nellie Zhang

Abstract

This paper uncovers trends in payment timing in Canada’s Large Value Transfer System (LVTS) from 2003 to 2011. Descriptive analysis shows that LVTS payment activity has not been peaking in the late afternoon since 2008, and the improvement was most significant in 2009. Ordinary least squares regressions are conducted to identify various factors that might have contributed to the changes in the payment value time distribution. The main findings include that a larger proportion of high-value payments results in later payment submission and hence settlement; as an important source of intraday liquidity, a higher CDSX payout value tends to speed up LVTS transactions. Several changes in the system parameters—such as increases in the frequencies of the Jumbo algorithm and Jumbo queue expiry—also quickened the settlement. In addition, the results suggest that the temporary exceptional liquidity initiatives introduced in late 2008 and a large increase in settlement balances were major contributors to the earlier settlement of LVTS payments.

Suggested Citation

  • Nellie Zhang, 2015. "Changes in Payment Timing in Canada’s Large Value Transfer System," Staff Working Papers 15-20, Bank of Canada.
    • Handle: RePEc:bca:bocawp:15-20
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    References listed on IDEAS

    as
    1. Olivier Armantier & Jeffrey Arnold & James J. McAndrews, 2008. "Changes in the timing distribution of Fedwire funds transfers," Economic Policy Review, Federal Reserve Bank of New York, vol. 14(Sep), pages 83-112.
    2. Mark Rempel, 2016. "Improving Overnight Loan Identification in Payments Systems," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 48(2-3), pages 549-564, March.
    3. Olivier Armantier & Adam Copeland, 2012. "Assessing the quality of “Furfine-based” algorithms," Staff Reports 575, Federal Reserve Bank of New York.
    4. Paul Miller & Carol Ann Northcott, 2002. "CLS Bank: Managing Foreign Exchange Settlement Risk," Bank of Canada Review, Bank of Canada, vol. 2002(Autumn), pages 13-25.
    5. Scott Hendry & Nadja Kamhi, 2007. "Uncollateralized Overnight Loans Settled in LVTS," Staff Working Papers 07-11, Bank of Canada.
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    Cited by:

    1. Ajit Desai & Jacob Sharples & Anneke Kosse, 2024. "Finding a needle in a haystack: a machine learning framework for anomaly detection in payment systems," IFC Bulletins chapters, in: Bank for International Settlements (ed.), Granular data: new horizons and challenges, volume 61, Bank for International Settlements.
    2. Irving Fisher Committee, 2024. "Granular data: new horizons and challenges," IFC Bulletins, Bank for International Settlements, number 61.

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    More about this item

    Keywords

    Payment clearing and settlement systems;

    JEL classification:

    • E - Macroeconomics and Monetary Economics
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • G - Financial Economics
    • G2 - Financial Economics - - Financial Institutions and Services
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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