Reforming Payment & Securities
Settlement Systems
November 3-7, 2003
Gary M. Bertone
Vice President
Wholesale Product Office
Federal Reserve Bank of New York
Gary.Bertone@ny.frb.org
Wholesale Product Office
– Fedwire®
– Funds Service
– Securities Service
– National Settlement Service
® Fedwire is a registered servicemark of the Federal Reserve Banks
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“ A pessimist sees the difficulty in every opportunity;
an optimist sees the opportunity in every difficulty.”
Winston Churchill
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Topics
• Networks
• Processing Platforms
• Customer Interaction
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Networks
Mature Telecom Infrastructures
Less Mature Telecom Infrastructures
• Broad access to a variety of
services
• Limited access to small number of
services
• Many telecom providers
• Small number of telecom providers
• Telecom diversity issues
• Telecom diversity issues
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Networks
Mature Telecom Infrastructures
Less Mature Telecom Infrastructures
• Telecom diversity issues
• Telecom diversity issues
– More telecom providers
means more competition, which
translates to lower prices
– More infrastructure (e.g., COs
and LECs) to choose from
should equate to better diversity
in connection routing but. . . .
– More infrastructure also
means it is difficult/costly to get
accurate routing information
and difficult to ensure that
diversity is maintained
– Fewer companies means less
competition and higher prices
– Less infrastructure means less
diversity increasing the single
points of failure
– Less infrastructure also means it
should be easier to get accurate
routing information
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Networks
Mature Telecom Infrastructures
Less Mature Telecom Infrastructures
• Broad access to a variety of
services
• Limited access to small number of
services
• Many telecom providers
• Small number of telecom providers
• Telecom diversity issues
• Telecom diversity issues
• We have built our own access
network
• Build or buy an access network
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Processing Platforms
Fedwire Processing Environment
Federal Reserve Infrastructure
Sending
Institution
FEDNET
Frame Relay
or Dial-up
Connection
Receiving
Institution
Frame Relay
or Dial-up
Connection
Dedicated Connection
Fedwire
Fedwire
Primary
Primary
Production
Production
Site
Site
XRF Recovery
Second Site
Hot Backup
Third Site
Third
Site
Warm
Backup
Warm Backup
XRF Recovery
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Processing Platforms
Legacy systems
Newly developed systems
Good News
• very reliable
• mature environmental and
application software
• solid change control processes
• robust, integrated monitoring tools
Bad News
• harder to make dynamic changes
• not based on open communication
standards (IP)
• getting harder to find people that
can support older technologies
• cost to support old platforms while
building new ones
• based on open communication (IP)
and application (XML) standards
• easier to make dynamic changes
• large pool of people available to
support systems (global pool)
• no costs for maintaining old platforms
• less reliable
• less mature environmental and
application software (constant changes)
• immature change control processes
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• immature integrated monitoring tools
Customer Interaction
• The Fed has gone through quite a change over the last 6 years
as its relates to our approach to getting customer input on the
operation of, and changes to our high value payment system
• These changes are focused on how, when, and on which
issues we seek customer input
• I want to discuss three areas: Formal comment process,
Customer advisory groups, Conferences/vendor seminars
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Customer Interaction
Formal Comment Process
• publish anticipated changes to our payment system service
offerings in the Federal Register for all to comment on
• established norms for allowing time for the public to review the
suggested changes and submit comments to us
• we will review the comments, possibly make changes based on
those comments, and publish the final plan
• not all changes require this formal process to be used
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Customer Interaction
Advisory Groups
• We have two advisory groups
– Highest volume customers
– Mid-Tier volume customers
• Benefits of these groups
– provides direct and timely information about the
requirements of our customers
– gives us the opportunity to test new ideas early, and in a
less formal way
– helps to build support for changes
– forces us to ensure we have a business case for all changes
we make
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– provides keen incite into what is happening in our markets
Customer Interaction
Conferences/Vendor Seminars
• These have proved to be a great way to provide a wide
variety of customers, vendors, and other payment system
providers with information about our services
• And to get input on the changes we are planning to make
and/or are in the process of implementing
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“ A pessimist sees the difficulty in every opportunity;
an optimist sees the opportunity in every difficulty.”
Winston Churchill
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