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(In)Efficiencies of current financial market infrastructures – a call for DLT?

Summary:
Basil Guggenheim, Sebastien Kraenzlin and Christoph Meyer of SNB in this paper : We use unique individual bank-to-bank repo transaction data to empirically assess the efficiency of the existing Swiss financial market infrastructure (FMI) for executing delivery versus payment transactions. This approach enables us to identify its current benefits and drawbacks and discuss how these could be addressed and to what extent distributed ledger technology (DLT) could provide a remedy. We find that the fastest settlement time for repo transactions is 12 seconds, but that settlements are often delayed by more than 10 minutes due to the lack of collateral availability. We conclude that the cross-border availability of securities needs to be addressed by either improving interoperability of

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Basil Guggenheim, Sebastien Kraenzlin and Christoph Meyer of SNB in this paper :

We use unique individual bank-to-bank repo transaction data to empirically assess the efficiency of the existing Swiss financial market infrastructure (FMI) for executing delivery versus payment transactions. This approach enables us to identify its current benefits and drawbacks and discuss how these could be addressed and to what extent distributed ledger technology (DLT) could provide a remedy. We find that the fastest settlement time for repo transactions is 12 seconds, but that settlements are often delayed by more than 10 minutes due to the lack of collateral availability. We conclude that the cross-border availability of securities needs to be addressed by either improving interoperability of existing infrastructures or using new technologies.

Amol Agrawal
I am currently pursuing my PhD in economics. I have work-ex of nearly 10 years with most of those years spent figuring economic research in Mumbai’s financial sector.

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