RDP 2012-05: Payment System Design and Participant Operational Disruptions 6. Conclusion

The results of simulations conducted in this paper suggest that the systemic impact of operational disruptions of participants is generally mitigated by the inclusion of hybrid features in an RTGS system. The bilateral-offset algorithm, combined with sub-limits, is the most effective way to mitigate the systemic consequences of an operational disruption. While the inclusion of a bilateral-offset algorithm lowers the value of unsettled payments resulting from an operational disruption, the extent of this beneficial effect is reduced if participants respond to this hybrid feature by reducing their holdings of liquidity. Sub-limits can also reduce the systemic impact of an operational disruption, as long as participants react to the disruption by stopping payments to the stricken participant and lowering their sub-limits to zero.

Methodological issues make it difficult to come to any firm conclusions regarding the benefits of introducing a central queue, in and of itself.

Simulated disruptions for the largest 15 participants of RITS also demonstrate that hybrid features tend to mitigate the effect of participant size on the systemic impact of a disruption at that participant.

When interpreting the results of this paper, the potential effect of endogenous behavioural responses (which are beyond the scope of this paper) need to be considered. In particular, the assumptions made in the simulations are likely to understate the benefits of incorporating hybrid features to the extent that these features encourage earlier submission of payments. A logical extension to this work would be to incorporate expected differences in submission behaviour relating to differences in the design of a system. This is left to future work.