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FedWire and CHIPS (USA)
These two systems handle the bulk of large-value transfers in the US wholesale payment sector. FedWire is the largest national gross settlement system RTGS in the world. It is owned and operated by the US Federal Reserve System using its operations centers and communications network.FedWire settlement participants are American depository institutions and branches of foreign banks that maintain reserve or clearing accounts with one of the 12 Federal Reserve Banks.
The system carries out transfers related to interbank settlements in the money market, payments in favor of companies and individuals, settlements for transactions with securities.
FedWire consists of three operational blocks: large and urgent money transfer systems, securities deposit and transfer systems, and netting settlement system.
Money transfers (Funds Transfer System) are carried out in real time, providing instant finality of payment by transferring funds to the reserve accounts of participants in the federal reserve banks. The payment is unconditional and final at the moment the funds are credited to the reserve account of the receiving bank.
To ensure the continuity of the payment process, the Fed provides overdraft loans to cover temporary shortfalls with repayment at the end of the business day. Due to the large size of the daily overdraft (in the mid-1990s it reached $ 170 billion a day) FedWire uses a risk limitation mechanism in the form of a maximum lending limit that the Federal Reserve Banks set for each settlement participant. Typically, these loans do not require collateral. However, individual financial institutions are required to provide collateral in the form of securities. In addition, a commission is charged on overdraft loans, which should act as a restrictive factor for banks using the Fed's overdraft loans.
The second block of FedWire (Book Entry Securities System) is a system for electronic storage of accounting records and transfer of securities. The Fed acts as the custodian for all issues of US Treasury bonds, federal agency securities, and mortgage-backed bonds. All of these securities exist in electronic form, and FedWire conducts transactions to transfer them through the accounts of the holders opened with the Federal Reserve Banks. The transfer is carried out in the DVP (Delivery vs Payment) format, with the simultaneous transfer of securities and cash equivalent through the accounts of the owners.
Finally, the third block of FedWire (Net Settlement Service) handles settlement operations for private netting systems in the retail sector (clearing houses, credit card settlement systems, ATM and POS networks, etc.).
At present, the total number of participants in FedWire settlements reaches 7,300. In 2009, 124 trillion transactions in the amount of 631 trillion US dollars were processed through the system | Federal Reserve Financial Services, 2009 J.
CHIPS (Clearing House Interbank Payment System) is a private settlement system for cross-border transfers of funds in US dollars. It accounts for over 95% of all world transactions in this currency. These are mainly interbank settlements (short-term loans, confirmation of correspondent accounts, etc.), various kinds of commercial client payments.
The system was established in 1970 by a group of New York banks and is operated by the New York Clearing House. At the first stage (1970-2001), it was a “clean” netting system operating on the principle of a double balance. There were two types of participants in the system - direct (12-15 banks) and associated. All payments during the day were reflected in the CHIPS account and were of a virtual nature. At the end of the day, two settlement sessions were held: first, direct participants offset and deducted net positions for associate members, and then the final settlement of settlements between direct participants was made. The final settlements were reflected in the reserve accounts of direct participants with the Federal Reserve Bank of New York.
In 2001, the system underwent a reorganization. The offsetting of counter payments began to be made in a continuous mode with final completion throughout the working day.
Every day, settlement participants must deposit certain amounts of money into their CHIPS current account by 9 am. This is the so-called initial position. During the day, payment instructions from settlement participants are sent to a centralized queue, where they are compared with the balance on the participant's account and incoming counter payments in his favor. When an opportunity arises to offset one or several orders, they are released from the queue and canceled. These transactions are reflected in the accounts in CHIPS.
At the end of the day (at 5 pm), a final session is held, during which part of the unfulfilled orders from the queue is canceled, and the rest of the orders are returned to the senders. As a result, the final net positions of the participants in this offset are revealed. The final results are reflected in reserve accounts with the Federal Reserve Bank of New York: the amounts of debit balances are debited from the accounts of the debtors and credited to the accounts of the creditors.
As a result, the accounts of CHIPS participants are closed with a zero balance, and the next day begins with the formation of initial positions on the accounts of settlement participants.
In 2008, 45 banks were among the participants of CHIPS (three times less than in 1985). The total amount of transactions for the year reached 509 trillion US dollars, the average amount of one transaction was 5.5 million US dollars.
