Project Meridian FX APAC Policy Findings

The SO prototype also performed two additional functions that extended beyond coordination: using a dedicated escrow account to replicate funds reservation within the Monetary Authority of Singapore’s test environment and calculating net settlement positions across the participating central bank test settlement systems (BOE Publications, 2023). These functions were specific to the capabilities of the test environments and are not inherent to synchronization itself (BOE Publications, 2023). The use of escrow accounts and netting calculations could alter the legal and risk profile of the SO, potentially bringing its role closer to functions associated with clearing (BOE Publications, 2023). [1]

Interoperability across different systems was achieved through the use of system-specific adapters or alternative operating arrangements, allowing the SO to accommodate differences in connectivity, access controls, and status reporting formats across participating central banks’ test environments (BOE Publications, 2023). Where earmarking was not implemented within a test environment, alternative arrangements were used to reserve funds, which could require the SO to perform additional functions (BOE Publications, 2023). These arrangements demonstrated that while interoperability could be achieved across central bank test settlement systems with different capabilities, the arrangements used to achieve it could affect the functions performed by the SO and the allocation of responsibilities between the SO and connected infrastructures (BOE Publications, 2023). [1]

The SO prototype in the Meridian FX APAC experiment performed four core coordination functions: instruction processing, funding coordination, readiness monitoring, and settlement and exception coordination (BOE Publications, 2023). These functions allowed the SO to ensure that linked payment legs proceed together or not at all, without requiring the SO to operate the underlying settlement systems or hold participants’ funds. The SO’s role in these functions is crucial for the successful execution of multilateral net FX PvP across different infrastructures. [1]

Interoperability across different systems was demonstrated in the Meridian FX APAC experiment through the use of system-specific adapters or alternative operating arrangements to achieve equivalent functional outcomes (BOE Publications, 2023). These adapters accommodated differences in connectivity arrangements, access controls and status reporting formats across participating central banks’ test environments, enabling the SO to perform its coordination functions effectively despite the varying capabilities of the central bank test settlement systems. [1]

In addition to its core coordination functions, the SO prototype also performed two additional functions that extended beyond coordination: using a dedicated escrow account to replicate funds reservation within the Monetary Authority of Singapore’s test environment and calculating net settlement positions across the participating central bank test settlement systems (BOE Publications, 2023). These additional functions were specific to the design and capabilities of the central bank test settlement systems and are not inherent features of synchronization or of a future SO model. [1]

The SO prototype in the Meridian FX APAC experiment performed four core coordination functions: instruction processing, funding coordination, readiness monitoring, and settlement and exception coordination (BOE Publications, 2023). Instruction processing involved receiving and matching settlement instructions across different infrastructures. Funding coordination included coordinating the earmarking or other securing of funds across participating central bank RTGS systems (BOE Publications, 2023). Readiness monitoring tracked the status of each leg and determined when all required legs were ready for settlement (BOE Publications, 2023). [1]

Settlement and exception coordination involved instructing settlement, releasing reservations where appropriate, and applying retry or unwind logic to preserve the integrity of the PvP workflow (BOE Publications, 2023). The SO did not need to operate the underlying settlement systems, maintain settlement accounts, or hold participants’ funds (BOE Publications, 2023). However, its actions could directly affect whether linked payments proceeded, were delayed, or were unwound when necessary (BOE Publications, 2023). [1]

The experiment demonstrated that interoperability across different systems could be achieved through the use of system-specific adapters or alternative operating arrangements to achieve equivalent functional outcomes (BOE Publications, 2023). Adapters accommodated differences in connectivity arrangements, access controls, and status reporting formats across participating central banks’ test environments (BOE Publications, 2023). These arrangements could affect the functions performed by the SO and the allocation of responsibilities between the SO and connected infrastructures (BOE Publications, 2023). [1]

Sources

BOE Publications

Prepared with AI assistance from the cited sources.