Liquidity-Saving Mechanisms for 24/7 Instant Payment Systems: Rolling Liquidity Bounds, Certified Offsetting, and an Open Benchmark
Liquidity-saving mechanisms (LSMs) let interbank payment systems settle with less intraday cash by queueing payments and settling offsetting sets together. Most analyses assume the system closes each day; instant-payment systems such as FedNow never close and promise settlement within seconds. This preprint gives the first analytical bounds for that setting: a liquidity floor that no settlement engine can beat when every payment must settle within a delay cap T; conditions under which the floor is attained, and a two-bank counterexample where it is not; rolling liquidity bounds for systems with no end of day; and a proof that settling a batch at once, netted, never needs more liquidity than any ordering of it. In simulations calibrated to published Fedwire and FedNow statistics, a one-minute cap leaves at most 0.55% of liquidity for any engine to save. The upload includes the paper, a standalone proofs note, and all code, data and tests (102 brute-force checks).
Authors
- Ethan Li
Publication Details
- Journal
- Zenodo (CERN European Organization for Nuclear Research)
- Published
- 2026-10-31
- DOI
- https://doi.org/10.5281/zenodo.23841233
- Primary Topic
- Banking stability, regulation, efficiency
- Type
- preprint