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August 13, 2018

BoE issued a call for interest from organizations, including fintech firms, to explore the demand for introducing synchronized settlement to the renewed Real-Time Gross Settlement (RTGS) service. Synchronization is referred to as the ability to synchronize cash movements in RTGS with the movement of cash or assets in other systems. BoE believes that this functionality could provide an opportunity to reduce cost and risk, improve efficiency, and support innovative new methods of settlement.

At the heart of synchronization is the concept of atomic settlement. This means that the transfer of two assets is linked in such that it ensures that the transfer of one asset occurs if and only if the transfer of the other asset also occurs—that is, the settlement is conditional. Therefore, the outcome of settlement is either both parties successfully exchanging those assets or no transfer taking place. BoE is focusing on a model, in which the renewed RTGS service could have the functionality required for a trusted third party (the Synchronization Operator) to connect and offer synchronization services to the market. The Synchronization Operator would have permissions to earmark and order the transfer of funds between participating institutions’ accounts in RTGS, but would not hold an account. The service could be used by multiple Synchronization Operators, and, if implemented, the designed functionality would be neutral regarding what asset transfer the fund movements were being synchronized with.

BoE is seeking to work with a small group of organizations to further explore the potential for this functionality. BoE is looking to engage with different types of firms—for example, a potential Synchronization Operator or a potential user who can see the benefit in synchronizing the payments they make or facilitate. Interested parties can indicate their preferred level of engagement on the topic. Level 1 includes all interested parties to complete a questionnaire on Key Survey by September 28, 2018. Level 2 of engagement involves inviting some firms to discuss the topic in further detail with BoE, via an introductory session, one-to-one sessions, and roundtable wrap-up. Parties should indicate on the questionnaire whether they are interested in engaging as a Level 2 firm.

 

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Keywords: Europe, UK, PMI, Synchronization, RTGS, Synchronization Operator, BoE

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