Journal of Financial Market Infrastructures

Manmohan Singh
International Monetary Fund

This second (spring) issue of Volume 11 of The Journal of Financial Market Infrastructures offers three articles that underscore the journal’s transition to embrace the role of new technologies, including digital money, the changes in global payments systems, etc. For readers who are yet to catch up with the first (winter) issue of this volume, The Journal of Financial Market Infrastructures has a new editorial team, comprising editor-in-chief Manmohan Singh from the International Monetary Fund and deputy editors Jorge Cruz from the University of Western Ontario and Anneke Kosse from the Bank for International Settlements.

This issue includes three papers: a Forum paper, primarily reviewed by the editorial team, as a thought piece to encourage analytical research; and two analytical research papers, which are refereed via the standard review process (ie, by at least two independent referees).

In the Forum paper, “Centralized and decentralized payments networks: a simple cost comparison”, Peter Stella compares the operational and cost parameters of several centralized fiat money settlement systems with those of Bitcoin, Ethereum and Solana. He finds that although blockchains with the capacity to enable smart contracts and tokenized asset trading will likely occupy important roles in the financial system of the future, fiat money settlement retains a significant cost advantage in the sphere of high-frequency money transfers.

The issue’s first research paper, “Just solve it: a simple method to improve the design and performance of liquidity-saving mechanisms” by Jordan Cambe and Zhiyi Xing, introduces a new liquidity-saving mechanism algorithm that presents unique flexibility benefits (such as the ability to explicitly formulate an objective function and optimize queues of payments over multiple variables). Furthermore, using simulations, the algorithm is shown to outperform two well-known benchmarks.

The second research paper in the issue is by David Li, Roy Cheruvelil and Viktoria Baklanova. “Alternative margin models for mortgage-backed securities” presents a study of margin models for mortgage-backed and to-be-announced (TBA) securities using the generalized autoregressive conditional heteroscedasticity t-copula (GARCH-t-copula) and filtered historical simulation (FHS) approaches. These methods are commonly used for derivatives and equity-based markets, but they have not been widely utilized in the MBS/TBA market. The model studied by Li et al can potentially be used as an alternative model framework that could reduce reliance on complicated mortgage models for margin and stress testing purposes in this asset class.

The landscape of financial market infrastructures continues to change rapidly. Well over a decade after its launch, the journal continues to provide its readership with a selection of cutting-edge papers, novel ideas and analytics that underpin research, especially in the areas of

• distributed ledger technologies, machine learning and artificial intelligence, and their impact on financial market infrastructures;
• payment, settlement and clearing systems;
• digital money (both private and public) and its impact on central bank operations and central bank balance sheets;
• tokenized deposits and stablecoins; and
• nonbank payment service providers and access to central bank payment rails.

We encourage regular submissions, and we aim to create opportunities for conferences and seminars for the dissemination of the key messages of papers that are selected for publication in this journal. For example, the papers in the winter issue have been presented both at a recent joint seminar by the Bank for International Settlements Innovation Hub Hong Kong Centre and The Journal of Financial Market Infrastructures and at the International Monetary Fund.

Jorge, Anneke and I very much hope you will enjoy reading these papers and we welcome suggestions on any topics that would be of particular interest to our readers.