Electronic Business: Concepts, Methodologies, Tools, and Applications (4-Volumes) P258 pot

2504 Global Trends of Payment Systems and the Next-Generation RTGS Project in Japan transactions. Most of the transactions that are processed by this system are yen leg settlements of foreign exchange transactions and international treasury settlements. The FXYCS has the RTGS mode as well as the DTNS mode, although the use of the RTGS mode, which includes the payment for CLS bank, is quite limited. The Zengin System T h e Z e n g i n S y s t e m i s a n a t i o n w i d e e l e c t r o n i c f u n d WUDQVIHUQHWZRUN$OPRVWDOO¿QDQFLDOLQVWLWXWLRQV LQ-DSDQPRUHWKDQ¿QDQFLDOLQVWLWXWLRQV participate in the Zengin System and use this system mainly for customer payments. As many of the payments made through this system are consumer and commercial payments, the transac- tion volume are extremely large, but the amount of each payment is rather small. In addition to single payments, the system also supports batch SD\PHQWV¿OHFRQWDLQLQJDQXPEHURISD\PHQWV such as payroll and pension payments. The Zengin 6\VWHPLVD'716V\VWHPZKRVH¿QDOVHWWOHPHQW of net positions takes place at the end of the day at the current account of the BOJ. Sharing of Roles Among Three Systems The BOJ-NET and the FXYCS are mainly for the inter-bank payments and characterized as large- value payment systems. On the other hand, the Zengin System is mainly for the customer pay- ments and regarded as a retail payment system. But, we have to pay some attention that some large-value payments are also processed in the Z e n g i n S y s t e m . T h a t i s b e c a u s e o f a h i s t o r i c a l r e a - son; international related payments are assigned to the FXYCS by the law of foreign exchange control, and domestic payments are handled by the Zengin System. Proposal of the RTGS-XG Project Proposal of Japanese Bankers Association In March 2004, Japanese Bankers Association 7 -%$SXEOLVKHGDUHSRUW³3URSRVDOIRU5HRUJDQL]- ing Fund Transfer Systems in Japan—Introduc- ing a Large Value Settlement System” (Japanese Bankers Association, 2004). This report proposed WKH LQWURGXFWLRQ RI D ³/DUJH 9DOXH 6HWWOHPHQW System.” The aims of the proposal were to reduce the settlement risk, to comply with the interna- WLRQDOVWDQGDUGVDQGWRLPSURYHWKHHI¿FLHQF\RI fund settlement. The proposal envisages the integration of large- value fund settlements in Japan. If this proposal was realized, fund transfer systems in Japan, which consists of the BOJ-NET, the FXYCS, and the Zengin System would be reorganized into a Large Value Settlement System and the Zengin System would be specialized in small value payments. The JBA submitted the report to the BOJ for further consideration, because the restructuring of the BOJ-NET was the key factor for realizing the proposal. Therefore, one can argue that the RTGS-XG project took root in private sector initiative. BOJ’s Proposal In response to the proposal of JBA, after deliber- ate consideration (Imakubo, Kei, & McAndrews, J. J., 2005), the BOJ announced its proposal for the Next-Generation RTGS (RTGS-XG) in No- vember 2005 (Bank of Japan, 2005). Following the public consultation process, the BOJ decided to implement the project and started the system development phase in February 2006 (Bank of Japan, 2006a). The purpose of this project was WRIXUWKHU HQKDQFHWKHVDIHW\DQGHI¿FLHQF\RI large-value payment systems in Japan, 2505 Global Trends of Payment Systems and the Next-Generation RTGS Project in Japan Outline of the RTGS-XG Project The RTGS-XG project consists of two sub-proj- HFWV7KH¿UVWVXESURMHFWLVWRDGGOLTXLGLW\VDY- ing features (LSF) to the pure RTGS mode of the BOJ-NET. The second sub-project is to incorpo- rate large-value payments currently handled by two private-sector DTNS systems, the FXYCS, and the Zengin System, into the new BOJ-NET with the LSF. Sub-Project A The sub-project A is to add the LSF into the BOJ- NET. The LSF consists of Centralized Queuing Function and Offsetting Function. Centralized Queuing Function As the current BOJ-NET doesn’t have a centralized queue, if a bank does not have enough liquidity at the current account at the BOJ, the payment instruction is rejected by the system and sent back to the sending bank. Once the centralized queue is constructed in the BOJ-NET, the payment order that is not covered by adequate liquidity would be suspended in the queue. Each participant can actively control the payment instructions in the TXHXHIRUWKHHI¿FLHQWVHWWOHPHQWZKLFKLQFOXGHV monitoring, setting the priority, reordering, and cancellation of the payment instructions. Offsetting Function Offsetting means the simultaneous processing of outgoing and incoming payment orders. The offsetting algorithm searches for the participants who have submitted payment orders for each RWKHU DQG FDOFXODWHV WKH QHW DPRXQW RI LQÀRZ DQG RXWÀRZ ,I WKH QHW RXWÀRZ LV VXI¿FLHQWO\ covered, which means the credit balance of the GHELWHGSDUWLFLSDQWLVODUJHUWKDQWKHQHWRXWÀRZ the system process the incoming and outgoing payment order simultaneously. The outcome of the offsetting is exactly the same as the netting of the two payment orders. The only difference is whether two payment orders are processed individually in a gross basis or the net amount is simply processed. In the RTGS-XG project, two kinds of offset- W L Q J D U HSO D Q Q H G W RE HL Q W U R G XF H G  2 QH L V³ EL O DW H U D O  offsetting,” in which payment orders are processed between the two participants. Bilateral offsetting is regarded as the main function for settlement, and the algorithm will run when certain movements take place in the system, including submission of a new payment instruction, increase in credit balance, and settlement, reordering or cancellation of a top-queued payment. 7KHRWKHULV³PXOWLODWHUDORIIVHWWLQJ´LQZKLFK payment orders are processed among three or more participants. Multilateral offsetting is regarded as the complementary function to the bilateral offsetting, and the algorithm will run at desig- nated times of the day. The execution times of multilateral offsetting will be set when there are fewer events initiating bilateral offsetting, since while the multilateral algorithm runs, the receipt of the new payment orders will be suspended. With these two offsetting functions, real-time gross settlement will be possible in a faster pace with lower amount of liquidity. LSF Account Participants who use the LSF should open the special account, the LSF account, in the RTGS- XG The LSF account is independent from the current account of the BOJ-NET, thus each par- ticipant should manage the respective liquidities of two accounts 8 . Participants can transfer the liquidity at any- time during the daytime between the current ac- count and the LSF account. Although the overdraft is not admitted at the LSF account, participants can obtain liquidity from the BOJ through the overdraft facility at the current account. While the operating hours of the current account is 2506 Global Trends of Payment Systems and the Next-Generation RTGS Project in Japan from 9:00 to 17:00 9 , participants can use the LSF account from 9:00 to 16:30. At 16:30, all the bal- ances at the LSF accounts will be automatically transferred back to the current accounts, which mean the balance of the LSF will be zero at the end of the day. If there are some remaining pay- ment orders in the queue, these orders will be cancelled automatically. The incoming and outgoing payment to/from a LSF account should be processed only against the LSF account of other participants and can not be processed against the current accounts of other participants. Most transactions between participants can be processed through the LSF account. Although some transactions should be executed at the cur- rent account, which includes 1) the transactions involving the BOJ and the government, 2) the net settlements of clearing systems (the Bill and Check Clearance and the Zengin System), and 3) the Delivery versus Payment (DVP) settlements of Japanese Government Bonds (JGB) and cor- porate bonds. Sub-Project B Current Situation of Large-Value Payment in Japan Currently, the large-value payments in Japan are divided into three payment systems. First of all, the BOJ-NET is the main settlement channel of large-value payments and settled 88.3 trillion yen on a daily average basis in 2005. The second one is the FXYCS, which handles mainly foreign exchange related payments. The FXYCS settled 16.4 trillion yen per day in 2005. The last one is the Zengin System, which is usually regarded as a retail payment system. However, a part of payments in the Zengin System, 0.2% of total volume, are large-value payments that are 100 million yen and up. These 0.2% large-value pay- ments accounted for 65% of total value, which is equivalent to 6.2 trillion yen per day in 2005. These divided large-value payments lead to some issues. Among them, there is a duplication situation. The Zengin System and the FXYCS are both the same kind of payment system, that is, the DTNS at the end of the day. It used to be the request of the law 10 to divide foreign exchange related payments from domestic payments, but the law was radically revised in 1996 and there is no need for the distinction any more. This en- vironmental change created the duplication as a UHVXOWPRUHVSHFL¿FDOO\WRRSHUDWHDQGPDLQWDLQ the two same kind of end of day net settlement systems. Consolidation of Large-Value Payment Flows The sub-project B of the RTGS-XG project is to incorporate large-value payments on the FXYCS and the Zengin System into the new BOJ-NET. 7KHWZREHQH¿WVDUHSRLQWHGRXWIRULQFRUSRUDWLQJ the payments in the private-sector DTNS systems into the BOJ-NET. Firstly, participants can obtain LQWUDGD\¿QDOLW\ZLWKWKHFRQWLQXRXVO\VHWWOHPHQW RIWKH/6),WLVDVLJQL¿FDQWULVNPLWLJDWLRQFRP- SDUHGWRWKHFXUUHQWVFKHPHRIHQGRIGD\¿QDO- ity in the private-sector systems. Secondly, the 57*6 ;*D FK LH YHV J U H D W H UH I ¿FL H Q F \ L Q O LTX LG L W \ usage. The LSF can save the liquidity by offset- ting the outgoing payment and incoming payment compared to the pure RTGS system, in which all the settlement is made on gross basis. Under the RTGS-XG, the FXYCS payment will be forwarded to the BOJ-NET via the FYXCS. And the main function of the FXYCS, the DTNS mode, will be abolished. As for the Zengin System, a newly developed interface will pick up the large-value payments and send them to the BOJ-NET, while the remaining small-value payments are processed in the Zengin System as before, in the DTNS method. When the interface sends large-value payments to the BOJ-NET, only interbank payment information will be sent, 2507 Global Trends of Payment Systems and the Next-Generation RTGS Project in Japan while customer information will be kept in the Zengin System. Implementation Timetable Phased implementation is planned for the RTGS- XG project. As for the phase 1, the development RIWKH/6)DQGWKHPRGL¿FDWLRQRIWKH);<&6 ZLOOEH¿QLVKHGDQGWKHQHZV\VWHPLVSODQQHG WREHODXQFKHGLQ¿VFDO\HDU 11 2008. :LWKUHJDUGWRSKDVHWKHPRGL¿FDWLRQIRU large-value Zengin payments, including the de- velopment of interface to the BOJ-NET, will be completed in 2011, when the next upgrading of the Zengin System is planned. THE RTGS-XG PROJECT AND THE GLOBAL TREND Feature Analysis of the RTGS-XG As features of the RTGS-XG, three characteris- WLFVFRXOGEHLGHQWL¿HGZKLFKLQFOXGH,QWHJUDWHG system, two-account system, and offsetting sys- tem. Integrated System The RTGS-XG of BOJ-NET will have two modes for settlement. At the current account, participants will be able to make a simple RTGS, just as the same as the current BOJ-NET. This mode can EHFDOOHGWKH³SXUH57*6PRGH´2QWKHRWKHU <C urrent situation> <Future> BOJ- NET (RTGS) FXYCS (DTNS) Zengin System (DTNS) (RTGS- XG) BOJ- NET RTGS mode Hybrid mode (LSF) Zengin System (DTNS) \88.3 trillion \16.4 trillion \9.5 trillion \110.9trillion \3.3 trillion small value large value )LJXUH&RQVROLGDWLRQRIODUJHYDOXHSD\PHQWÀRZV Note: Settlement values are daily averages in 2005 2508 Global Trends of Payment Systems and the Next-Generation RTGS Project in Japan hand, at the LSF account, continuous settlement with liquidity saving feature will be possible. 7KHODWWHUPRGHWKH³OLTXLGLW\VDYLQJPRGH´LV a Hybrid mode, where offsetting is executed on a continuous basis. Having both the RTGS mode and the Hy- EULGPRGHWKH57*6;*ZLOOEHGH¿QHGDVDQ Integrated System. Participants will be able to select the mode of settlement according to the character of the payment. It is expected that most of the payment will be made in liquidity saving mode, because participants can make settlement with fewer amount of liquidity, which means the cost-saving for the participant. As for the urgent payment or time-critical payment, it is expected to be processed in the pure RTGS mode. Also some transactions, including BOJ and government related transaction and DVP settlement of JGB, are assigned to the pure RTGS mode. In the evolutionary process of payment sys- tems, the RTGS-XG will be one of the cutting edges of the world payment systems, along with RTGS plus in Germany, PIS in France, new BI-REL in Italy, and LVTS in Canada. Two-Account System The RTGS-XG will have two separate accounts in one system: the current account and the LSF account. Participants will have to monitor and manage the two liquidities in each account during t h e d a y. I n s o m e I n t e g r a t e d S y s t e m s , l i k e RTG S plus in Germany, single liquidity pool is adopted, and participants can control the liquidity in the single account. The single liquidity pool would be more user-friendly than two-account system. But, the RTGS-XG will allow participants to transfer the OLTXLGLW\ÀH[LEO\EHWZHHQWKHWZRDFFRXQWVGXU- ing the day (all day liquidity bridge). Thus, it is presumed that management burden of two liquidi- WLHVZRXOGQRWEHVLJQL¿FDQW,WLVDSSDUHQWZKHQ compared to the case of the EAF2 in Germany, which allowed transferring the liquidity only once every hour. In terms of two accounts, the RTGS-XG has similar structure to the PIS in France, where liquidity bridge combines the PNS account and the TBF account. In the case of the RTGS-XG, consideration for the system development was the major factor to choose the separate LSF account. The BOJ-NET provides not only fund transfer service but also government bond settlement service. Therefore, the current account already has a very sophisti- cated link with the JGB account in the BOJ-NET through DVP mechanism and self-collateral scheme. It seemed concerned that to add the LSF to the current account might make the account structure too complicated. Offsetting System The RTGS-XG adopts the offsetting scheme. As mentioned earlier, there is not much difference between netting scheme and offsetting scheme, with regard to the outcome of the processing. In both cases, the difference of outgoing payment and incoming payment would be added or debited from the participants’ account. The concept of offsetting was introduced to the RTGS plus LQIRUWKH¿UVWWLPHLQWKHZRUOG,W was because the RTGS plus would be a part of the TARGET, and only RTGS systems were allowed to link to the TARGET. So to avoid becoming a netting system that could not be liked the TAR- GET, Deutsche Bundesbank invented the concept of offsetting, which means the simultaneous ERRNLQJRIRIIVHWWLQJSD\PHQWÀRZV In the case of the BOJ-NET, there is no such a constraint. But only a situation was BOJ abolished, the netting mode in 2001 when the BOJ-NET became a pure RTGS system. So it would pre- VXPDEO\EHUDWKHUGLI¿FXOWIRUWKH%2-WRH[SODLQ the LSF as adding a netting function again only several years after. It is just conceivable that this might be a sort of reason to adopt the offsetting concept instead of netting concept. 2509 Global Trends of Payment Systems and the Next-Generation RTGS Project in Japan %HQH¿WVRIWKHRTGS-XG Project Upon the characteristics of the RTGS-XG men- WLRQHGOHWXVVHHWKHEHQH¿WVWKLVSURMHFWZRXOG bring. To Achieve Earlier Settlement and Reduce the Risk 7KH¿UVWEHQH¿WLVWRUHDOL]HWKHHDUOLHUVHWWOHPHQW DQGWKH¿QDOLW\LQWKHGD\WLPHZKLFKOHDGWRWKH risk reduction. Large-value payments that are currently processed in the FXYCS and the Zengin V\VWHPREWDLQWKH¿QDOLW\RISD\PHQWRQO\DWWKH end of the day. After incorporating all large-value payments into the RTGS-XG, all the settlements will be made on a real-time basis and get the ¿QDOLW\GXULQJWKHGD\,WLVFDOOHG³LQWUDGD\ ¿QDOLW\´,WLVDPDMRUEHQH¿WRIWKH57*6;*WR JLYHHYHU \OD UJH YDOXHSD\ PHQWLQWUD GD\¿QDOLW\ and reduce the settlement risk. To Reduce Liquidity Cost 7KHVHFRQGEHQH¿WLVWKHUHGXFWLRQRIWKHOLTXLG- ity cost for the participants. With the LSF, par- ticipants can make continuous gross settlement with small amount of liquidity by offsetting their o u t g o i n g p a y m e n t s w i t h i n c o m i n g p a y m e n t s f r o m other participants. Although the BOJ provide the intra-day overdraft with no fee, participants have to pledge collaterals to get the overdraft. Thereafter, the RTGS-XG reduces the cost for participants by reducing the liquidity necessary for the settlement. To Prevent Gridlock 7KH WKLUG EHQH¿W LV WR SUHYHQW JULGORFN LQ WKH payment system. In the pure RTGS system, par- ticipants tend to wait for the incoming payments before sending out their outgoing payments, or sometimes try to send the payment instructions as late as possible in order to save their liquidity. If many participants try to do the same thing, the circulation of liquidity in the system would be blocked and prevents a substantial number of instructions from being executed. This kind of VLWXDWLRQLVFDOOHG³JULGORFN´:LWKWKH/6)WKH 57*6;*PDWFKHVWKHRIIVHWWLQJSD\PHQWÀRZV and saves the liquidities of both sides. This will substantially reduce the necessity for participants to hold off on sending payment instruction. Ac- cordingly, participants are expected to send their instructions earlier and overall earlier settlement in the system would be accomplished. To Comply with the International Standard The compliance with the international standards LVDQRWKHUHVVHQWLDOEHQH¿W,Q-DQXDU\WKH Bank for International Settlements (BIS) pub- O LV KH G ³& RU H3 U L Q FL SOH VI R U 6 \V W HP L F D O O \, P S R U W D Q W Phase Sub-Project Estimated time Phase1 Development of LSF in BOJ-NET 0RGL¿FDWLRQIRU);<&6SD\PHQWV Fiscal 2008 Phase2 Modification for large-value Zengin payments 2011 Table 6. Implementation timetable of the RTGS-XG project 2510 Global Trends of Payment Systems and the Next-Generation RTGS Project in Japan Payment Systems (Core Principles)” and these principles are regarded as an essential interna- tional standard to be observed. Core Principle ,9GHVFULEHV³7KHV\VWHPVKRXOGSURYLGHSURPSW ¿QDOVHWWOHPHQWRQWKHGD\RIYDOXHSUHIHUDEO\ during the day and at a minimum at the end of WKHGD\´7KH¿UVWSDUWDFKLHYLQJ¿QDOVHWWOHPHQW E\WKHHQGRIWKHGD\LVUHJDUGHGDVD³PLQLPXP standard” which every country should observe. Fortunately, three Japanese payment systems, the BOJ-NET, the FXYCS, and the Zengin System meet the requirement. On the other hand, the latter part, achieving LQWUDGD\¿QDOLW\LVUHJDUGHGDVD³EHVWSUDFWLFH´ which is recommended for the advanced countries. 7KH&RUH3ULQFLSOHVUHSRUWDOVRPHQWLRQHG³3UR- YLGLQJLQWUDGD\¿QDOLW\LVSDUWLFXODUO\GHVLUDEOH in countries with large volumes of high-value SD\PHQWVDQGVRSKLVWLFDWHG¿QDQFLDOPDUNHWV´ No one might want to contend that the Japanese PDUNHWLVQRWLQFOXGHGLQWKLVGH¿QLWLRQ7KXV LQWUDGD\¿QDOLW\ZRXOGEHGHVLUDEOHIRUWKHSD\- ment systems in Japan, but the FXYCS does not PHHWWKLVUHTXLUHPHQW¿QDOLW\LVSURYLGHGRQO\ at the end of day. Actually, it was the starting point of the discussion for the reform plan of large-value payment systems. The discussion on how to FRPSO\WKHLQWUDGD\¿QDOLW\UHTXLUHPHQWOHDG to the proposal of the JBA and developed to the RTGS-XG project. The RTGS-XG will settle all the large-value SD\PHQWZLWKLQWUDGD\¿QDOLW\ZKLFKZLOOPHHW the requirement of Core Principles. This is another LPSRUWDQWEHQH¿WRIWKLVSURMHFW FUTURE TRENDS Ahead of BOJ, the Monetary Authority of Singa- SRUH0$6VXFFHVVIXOO\LPSOHPHQWHG³0(36´ LQ'HFHPEHU0(36ZDVWKH¿UVW,QWHJUDWHG System in Asia, which replaced the previous na- tional inter-bank payment system, MEPS. The remarks of the managing director of MAS would give us a practical suggestion. He mentioned WKDWFKDQJHVLQWKH¿QDQFLDOODQGVFDSHKDGOHGWR DQHHGIRUPRUHHI¿FLHQWOLTXLGLW\PDQDJHPHQW improved risk management and more streamlined SD\PHQWÀRZVDQG0(36ZDVGHVLJQHGWRPHHW these needs. If the market demand works in the same way, it is highly possible that the payment systems would continue an evolutionary progress with the aid of technological innovation in order to meet the market needs. Shortly after the RTGS system was invented, only a handful of countries adopted this innova- tive system, which was quite effective in reduc- ing the settlement risks. However recently, the number of countries that adopt the RTGS system is getting close to 100. Therefore, one can predict WKDWWKHVH³$GYDQFHG6\VWHPV´ZRXOGJUDGXDOO\ become the prevailing system throughout most of the world. It should be added that the RTGS system took more than 20 years to become the prevailing system. CONCLUSION Technological progress and market needs push ahead with deployment of new types of payment systems, which include the Hybrid System and the Integrated System. These Advanced Systems bring a better combination of risk reduction and HI¿FLHQWVHWWOHPHQW7KH1H[W*HQHUDWLRQ57*6 Project in Japan would be a good example of such ongoing progress. This trend for sophisticated payment systems is believed to continue and be- come widespread. We should keep a sharp eye on the progress and analyze how the new wave of payment systems would affect on the risk control and liquidity management. Future Research Directions As mentioned in this chapter, the designs for the payment systems are changing, which created the 2511 Global Trends of Payment Systems and the Next-Generation RTGS Project in Japan n e w t y p e o f A d v a n c e d S y s t e m s . T h i s p r o g r e s s w a s the reaction to the market needs that seek more sophisticated liquidity control and risk manage- ment. The market needs and historical background vary from country to country and the technologies that can be adopted would differ at the time of implementation. As a consequence, the Advanced Systems vary in the system designs and functions, especially queue management, payment match- ing, liquidity control, account structure, and so on. These kinds of diversity should be analyzed further with the reason behind. Liquidity and risk is the most important key words when discussing the payment systems. That is to say, how to reduce the settlement risk and how to make settlements with lower amount of liquidity was the two main subjects to improve the payment system. The payment systems have been progressed balancing the two factors. How did the Advanced Systems contribute to the improvement of the two factors? That would be another meaningful research topic. This chapter focused on the large-value pay- PHQW V\VWHPV LQ WKH SD\PHQW ¿HOG %XW PDMRU innovations are also taking place in the retail SD\PHQW¿HOGLQFOXGLQJHOHFWURQLFPRQH\PR- bile payment, e-commerce, and micro-payment. These areas have numerous research topics to be done. As a theoretical approach, some economists try to analyze payment systems using game theory, information economics, and theory of industrial RUJDQL]DWLRQ7KLVDUHDLVFDOOHG³(FRQRPLFVRI Payments,” which seems to be one of the promis- ing area of research. Last but not least, what is the most desirable payment system? It is widely alleged that there is no single solution for the ideal payment system. But someone may not be convinced with the common belief. REFERENCES Bank for International Settlements. (2001, Janu- ary). Core principles for systemically important payment systems. Bank of Japan. (2005, December). Proposal for the next-generation RTGS project of the BOJ-NET funds transfer system. Bank of Japan. (2006a). Framework for the next- generation RTGS project of the BOJ-NET funds transfer system. Bank of Japan. (2006b). Outline of the 2005 Issue of the Payment and Settlement Systems Report. Bech, M. L., & Hobijn, B. (2006, September). Technology diffusion within central banking: The case of real-time gross settlement. Federal Reserve Bank of New York Staff Reports. Imakubo, K., & McAndrews, J. J. (2005, August). Initial funding levels for the special accounts in the new BOJ-NET. Bank of Japan Working Paper Series. Japanese Bankers Association. (2004). 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The evolution of large-value payment systems in the Euro area. ECB Monthly Bulletin. Fry, M. (1999, February). Risk, cost, and liquidity in alternative payment systems. Bank of England Quarterly Bulletin. Fry, M., Kilato, I., Roger, S., Senderowicz, K., Sheppard, D., Solis, F., & Trundle, J. (1999). Pay- ment systems in global perspective. Routledge International Studies in Money & Banking. Hollanders, M. (2006-2007). Issues Shaping the future of payment systems. SPEED, 1(3). Pringle, R., & Robinson, M. (2002). E-money and payment systems review. Central Banking Publications Ltd. Humphrey, D. B. (1995). Payment systems— Principles, practice, and improvements. The International Bank for Reconstruction and De- velopment. 2513 Global Trends of Payment Systems and the Next-Generation RTGS Project in Japan Martin, A. (2005). Recent evolution of large-value payment systems: Balancing liquidity and risk. Economic Review (First Quarter). Federal Reserve Bank of Kansas City. McAndrews, J., & Trundle, J. (2001, December). New payment system designs: Causes and con- sequences. Financial Stability Review, Bank of England. Millard, S., & Saporta, V. (2005, December). The future of payments. Financial Stability Review, Bank of England. ENDNOTES 1 Payment systems are generally divided into two categories: large-value payment systems (LVPS) and retail payment systems. LVPS facilitate payments, generally of very large amounts, which are mainly exchanged be- tween banks and usually require urgent and timely settlement. Retail payment systems handle mainly consumer payments of rela- tively low value and urgency. As LVPS are WKH PRVW VLJQL¿FDQW SD\PHQW V\VWHPV IRU the national economy, hereinafter payment system means LVPS in this chapter, if not RWKHUZLVHVSHFL¿HG 2 TARGET (Trans-European Automated Real- time Gross settlement Express Transfer) system. TARGET links the RTGS systems o f E U c o u n t r i e s t o f a c i l i t a t e t h e c r o s s - b o r d e r settlement of Euro. Only RTGS systems were permitted to be linked to TARGET system because TARGET was designed as a RTGS system as a whole. 3 Hybrid means something that consists of or comes from a mixture of two or more other things. 4 Centrale des Règlements Interbancaires. Created in January 1995, CRI manages the PNS. The shareholders of CRI are French credit institutions and Banque de France. 5 The concept of offsetting was adopted by RTGS plus ¿UVWWLPHHYHULQWKHZRUOG 6 The BOJ-NET comprises two systems: A system for funds transfer (BOJ-NET Funds Transfer System) and a system for the settlement of Japanese Government Bonds (BOJ-NET JGB Services). In this chapter, BOJ-NET Funds Transfer System (FTS) is referred simply as BOJ-NET. 7  -%$ LV D SUHPLHU ¿QDQFLDO RUJDQL]DWLRQ whose members consist of banks and bank- ers association in Japan. The Association had 249 members at the end of 2006. JBA is involved in the planning of some clearing systems. The Tokyo Bankers Association (TBA), the biggest regionally based bankers association and one of the Special Members of JBA, operates the Zengin System and the FXYCS. As the secretariat of TBA is the same as that of JBA, JBA is the substantial operator of the two clearing systems. 8 Reasons to set up independent LSF account include the considerations for transaction processing performance and for smooth system development. 9 Participants can extend the operating hours until 19:00 with permission from the BOJ. 10 Foreign Exchange and Foreign Trade Con- trol Law used to strictly restrict the foreign exchange transactions. In 1996, the law was drastically revised and foreign exchange transaction was fully deregulated. 11  7KH-DSDQHVH¿VFDO\HDUVWDUWVLQ$SULODQG ¿QLVKHVDWWKHHQGRIWKHQH[W0DUFK This work was previously published in Cyberlaw for Global E-business: Finance, Payments, and Dispute Resolution, edited by T. Kubota, pp. 109-127, copyright 2008 by Information Science Reference (an imprint of IGI Global). . BOJ-NET and the FXYCS are mainly for the inter-bank payments and characterized as large- value payment systems. On the other hand, the Zengin System is mainly for the customer pay- ments and regarded. the transactions involving the BOJ and the government, 2) the net settlements of clearing systems (the Bill and Check Clearance and the Zengin System), and 3) the Delivery versus Payment. Italy, and LVTS in Canada. Two-Account System The RTGS-XG will have two separate accounts in one system: the current account and the LSF account. Participants will have to monitor and manage