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 2 “ A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.” Winston Churchill 3 Topics • Networks • Processing Platforms • Customer Interaction 4 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 5 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 6 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 7 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 8 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 9 • 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 10 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 11 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 12 – 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 13 “ A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.” Winston Churchill 14