"... In PAGE 17: ... However, as mentioned earlier, it is not uncommon to see systems that combine securities gross settlement with funds net settlement or other type of combinations. Table1 . Number of Settlement Operations and Liquidity Needs by Settlement Type Settlement Type Number of Settlement Operations Value of Settlement Operations Gross k (k-1) = = k j j k i t 1 1 Bilateral Net k (k-1)/2 = = k j ij k i n 1 1 Multilateral Net k = k i i m 1 21 For simplicity purposes, it is assumed that each item in the matrix, tij, represents a single operation, thus, matrix T provides the information about the number of operations (one per item) and the value.... ..."

"... In PAGE 15: ...lement imbalances between the U.S. and these countries, hence increasing overall e#1Eciency. Table3 presents the percentage changes in prices, pro#1Cts, the settlement imbalance, and overall e#1Eciency, when settlement rates are changed from the Nash bargaining solution to the marginal costs of incoming calls #28d ij = d ji =0:1#29. This is 14 In U.... In PAGE 17: ... With four countries, there will be six bilateral settlement rates, and we consider the impact of forcing all six settlement rates to be based on the marginal cost of incoming calls. From Table3 , it can be seen that governments in middle-income countries #28in- terpreted as m j = 0:5 and m j = 0:75#29 have little incentive to unilaterally require lower settlement rates with high-income countries, since there is almost no e#1Eciency gain and the carriers pro#1Cts are reduced substantially. Given that in middle-income countries carrier pro#1Cts are valued more highly by the government than consumer surplus, cost-based settlement rates may not be preferred.... ..."

"... In PAGE 18: ... That is, transaction t12 cannot be executed. Table2 shows the number and value of transactions affected. In this case, a gross settlement system would be less affected both in terms of number and value of transactions.... ..."

"... In PAGE 20: ...27 Management initiatives, procedures, and tools have been developed to mitigate the impact of the risks described above. Table3 presents a range of risk management tools and the associated targeted risk: Table 3. Risk Management Tools for Securities Clearance and Settlement Systems... ..."

"... In PAGE 7: ...e., reserves in excess of bi-weekly requirements) documented in the bottom panels of Figures 1-3 and in Table2 is remarkable. Far... In PAGE 8: ...eserves equal 2.4 percent of required reserves (or about $1.3 billion) over a typical whole period, they equal about 7 percent of required reserves on a typical settlement Wednesday, but less than 2 percent on non-settlement days. All tests reported in Table2 reject the null of equality between settlement and non-settlement days, with non-parametric statistics showing that excess reserves-- similarly to interest rates--tend to rise on 70 percent of settlement Wednesdays. An interesting issue, relevant for the analysis that follows, is that of whether such reserve patterns reflect the cyclical behavior of reserves provided to banks by the non-bank sector, or that of reserves supplied by the Fed.... ..."

"... In PAGE 77: ... Table12 (contd.) Delivery lag Central Securities Depository Cash Settlement Agent Number of transactions (thousands) Value of transactions (USD billions) 9 Ratio of transactions value to GDP (at annual rate) Australia Austraclear (1998) T Austraclear CB+B+O 168 1,131 20 3.... ..."

"... In PAGE 21: ... We test these predictions by running a separate least squares regression for eachyear in the sample, as well as a regression on the means over the seventeen years of data. The results from Table5 con#1Crm one of the main predictions of our model, that settlement rates are increasing in the income disparitybetween countries. The coef- #1Ccient on income disparity is statistically signi#1Ccant #28at the 1#25 level#29 in every year.... In PAGE 21: ....S. market. We #1Cnd further support for this proposition from time series regressions below. Table5 suggests distance, population, and area are important determinants of settlement rates, although their importance diminishes over the sample, most likely because the costs that these variables proxy were falling over the sample period #28at least when measured on a per-minute basis#29. Of the three variables, distance appears to be the most important; it is statistically signi#1Ccant #28at the 1#25 level#29 in every year, and a standard deviation shock to distance has a bigger impact on settlement rates than a standard deviation shocktoeither population or area.... In PAGE 23: ...2 cents, while with the #1Cxed and random e#1Bects models, the fall in settlement rates is more than 18 cents. Thus, in contrast to Table5 , these results suggest that the emergence of 24 There were only two cases where these coe#1Ecients were not signi#1Ccant at the 5#25 level; the coe#1Ecients on population in the #1Cxed and random e#1Bects regressions.... ..."

"... In PAGE 11: ... Likewise, Bank B is obligated to send $1 million to A over CHIPS (the corresponding large-value system for settling dollar legs) at some point during t+2.11 As illustrated in Table1 , we suppose that the yen transaction happens to be executed first. In most cases, both funds transfers occur and the trade is settled.... In PAGE 12: ... Under CLS, final settlement of each side of a transaction is simultaneous and mutually conditional. Under the current arrangement there is an instant where one bank (Bank A in Table1 b) has paid out funds to its counterparty but not received funds in return. At this point, Bank A is a creditor of Bank B and therefore vulnerable to a failure by Bank B.... ..."