Simulating the Fedwire®
Securities Service
PAYMENT AND SETTLEMENT SIMULATION SEMINAR AND WORKSHOP
Bank of Finland
August 26, 2004
Morten Linnemann Bech, Kurt Johnson &
Kimmo Soramäki1
Federal Reserve Bank of New York
The views expressed in this presentation do not necessarily reflect those of
the Federal Reserve Bank of New York or the Federal Reserve System
11 European Central Bank
Diffusion of BoFPSS
2004
2003
2001
2000
1999
1997
1996
U.S. Bond Market Overview
Outstanding Bond Market Debt
Corporate $4.6T
20%
Treasury $3.7T
16%
Federal Agency Debt Outstanding
TVA $23b
1%
FCS $98b
4%
Other $50b
2%
Sallie Mae $68b
2%
Fannie Mae $937b
34%
Federal Agency $2.7T
12%
Money Market $2.6T
12%
FHLB $781b
29%
Municipal $1.9T
8%
Asset Backed $1.7T
8%
Mortgage Related
$5.3T
24%
Mortgage Related includes Agency MBS, Agency CMO and PrivatePrivate-Label MBS
Source: Bond Market Association
Freddie Mac $747b
28%
FCS = Farm Credit System
FHLB = Federal Home Loan Bank System
TVA = Tennessee Valley Authority
Source: Bond Market Association
Clearing and Settlement of U.S.
Government and Agency Securities
Primary
Dealers
Trade
Execution
InterInter-dealer
Brokers
(IBDs)
Primary
Dealers
Clearing
Fixed Income
Clearing
Corporation (FICC)
Fedwire Securities
Service (FSS)
Settlement
Depository
Institutions
Clearing Banks
Fedwire Securities Service
•
Safekeeping
Electronic (book-entry) storage
•
Transfer Facility
DVP
Free of payment
•
Fiscal Agent Services
Issuing, servicing and redemption
Ownership Interest Structure
Issuer
Fedwire Securities Service
Depository Institution
Investor:
Bank custody and trust
Clearing Bank
Depository Instititution
Dealers and
broker/dealers
Etc.
Investor
Dealer safekeeping
Investor:
Bank custody and trust
Depository Institution
Institutional Investor:
Bank custody and trust
Depository Instititution
Etc.
Account Structure
Participant A
Funds
USD
$14.000.000
Investment
Dealer
Trust
Collateral
7 1/2 BOND 24
912810ES3
100,000,000
7 1/4 BOND 22
912810EM6
1,002,000,000
7 1/4 BOND 22
912810EM6
23,000,000
BILL 08/12/04
912795QX2
20,000,000
6 NOTE C 09
9128275N8
503,000
GNMI SF 310361 X
36223KWW6
12,500,000
5 ISS A 05
915687WD7
-3,500,000,000
1.50 FHLB 05 G449
3133X4E80
56,000,000
5.50 FGPC A19168 G
31296UFH9
120,000,000
6.5 ISS A 16
915611MT6
34,000,000
6.5 ISS A 16
915611ET6
-1,500,000,000
7 1/4 BOND 22
912810EM6
102,000,000
Issuer
5 ISS A 04
91567YUM6
-2,000,000,000
100
1,200
25
250
90
1,000
20
200
80
800
15
150
70
600
10
100
60
400
5
50
50
200
0
40
0
1989
1991
1993
1995
Transfers originated (volume)
1997
1999
2001
2003
Transfers originated (value) - right axis
Figure 1: Transfers Originated
0
1989
1991
1993
1995
Average daily volume
1997
1999
2001
2003
Average daily value - right axis
Figure 2: Average Daily Volume and Value
$Billion
300
'000
30
$Trillion
Million
Transfer Facility
Computing
•
Dell PWS650 Workstation
2 Intel Xeon 3.2Ghz CPUs
3.5GB of RAM
Windows XP Professional
•
•
Version 2.x of the BoFPSS Simulator.
The average time for simulating one
scenario was 3 hours
Account Structure in
Simulation
Participant A
Participant A
Funds
Investment
Dealer
Funds
USD
$14.000.000
7 1/2 BOND 24
912810ES3
USD
100,000,000
$14.000.000
Trust
General
7 1/4 BOND 22
912810EM6
7 1/4
BOND 22
1,002,000,000
912810EM6
1,127,000,000
BILL 08/12/04
912795QX2
20,000,000
6 NOTE C 09
5.50 FGPC
A19168 G
9128275N8
31296UFH9
503,000
120,000,000
1.50 FHLB 05 G449
3133X4E80
56,000,000
5.50 FGPC A19168 G
BILL 08/12/04
31296UFH9
912795QX2
120,000,000
Collateral
Issuer
Issuer
7 1/4 BOND 22
912810EM6
6 NOTE
C 09
23,000,000
9128275N8
503,000
GNMI SF 310361 X
7 1/236223KWW6
BOND 24
912810ES3
12,500,000
100,000,000
6.5 ISS A 16
20,000,000
1.50 FHLB 05 G449
915611MT6
3133X4E80
34,000,000
56,000,000
7 1/4 BOND 22
912810EM6
23,000,000
GNMI SF 310361 X
36223KWW6
12,500,000
6.5 ISS A 16
915611MT6
34,000,000
7 1/4 BOND 22
912810EM6
102,000,000
7 1/4 BOND 22
5 ISS912810EM6
A 04
102,000,000
91567YUM6
5 ISS A 04
91567YUM6
-2,000,000,000
-2,000,000,000
5 ISS A 05
915687WD7
-3,500,000,000
6.5 ISS A 16
915611ET6
-1,500,000,000
5 ISS A 05
915687WD7
-3,500,000,000
6.5 ISS A 16
915611ET6
-1,500,000,000
Data
• May 17, 2004
• 88,604 Transfers
6.901 Reversals
694 New Issues
• $1.43T in par value
$69b Reversals
$104b New Issues
• 5,867 CUSIPs
9 of Top 10 = US Tnotes
• 298 Active particip.
154 Senders, 274
Receivers & 9
issuers
Top 5 initiated 55%
20,561accounts
20,120 security
298 funds
143 issuer
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
8:30
9:00
9:30
10:00
10:30
11:00
Securities Transfers
11:30
12:00
12:30
Reversals
13:00
13:30
Issuances
14:00
14:30
15:00
15:30
Settlement Delay
Money
Lower Bound
Security
Upper Bound
Security
Lower Bound
Money
Security
Upper Bound
Money
Settlement Delay and Liquidity
Surface
Forward Flip
0.45
0.4
0.35
Delay Indicator
0.3
0.25
0.2
0.15
0.1
0.05
0
90
100
110
120
130
140
150
Aggregate Credit Limit ($billion)
DVP
No DVP
160
170
180