Liquidity Usage and Payment Delay Estimates of the New Canadian High Value Payments System

Francisco Rivadeneyra and Yinan Nellie Zhang

No 2020-9, Discussion Papers from Bank of Canada

Abstract: This paper presents simulation results for Canada's new large-value payments system: Lynx. We simulate the settlement process of Lynx using a large sample of payments observed in the current system (LVTS), taking the initial level of liquidity as given. We calculate the resulting liquidity usage, the payment delay and the shares of payments settled on a gross or net basis. The behaviour of participants (timing of payment submission) is assumed to remain the same as in LVTS. With an initial liquidity comparable to the collateral amount currently pledged in LVTS ($14.6 billion), Lynx FIFO Bypass would result in 28 minutes of average weighted delay and $17.3 billion of liquidity usage (the sum of intraday maximum net debit positions). Given this configuration, on average, $1.9 billion would be needed to clear non-urgent payments delayed until the end of the day, equivalent to 4.1 percent of payment value and 0.06 percent of volume. Doubling the amount of initial liquidity (to $29.3 billion) would result in 12 minutes of weighted delay. This basic configuration of Lynx requires a higher level of liquidity than LVTS and a plain-vanilla RTGS with pooled liquidity.

Keywords: Financial services; Financial system regulation and policies; Payment clearing and settlement systems (search for similar items in EconPapers)
JEL-codes: C5 E4 E42 E5 E58 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2020-09
New Economics Papers: this item is included in nep-cmp, nep-mac and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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