Journal of Financial Market Infrastructures

Welcome to the last issue of the third volume of The Journal of Financial Market Infrastructures.

The first paper in this issue, "A dynamic approach to intraday liquidity needs" by Freddy Cepeda López and Fabio Ortega Castro, studies the intraday liquidity needs of systemically important entities using simulations of the various Colombian financial market infrastructures (FMIs). The authors distinguish between the direct, secondround and feedback effects that a participant experiences if its main liquidity supplier fails to pay in the Colombian real-time gross settlement system. The paper shows that if liquidity in another FMI (based on the proprietary positions of government securities) were taken into account, the resulting arrangement would be more robust. This paper provides a monitoring tool for intraday liquidity management, in line with the recommendations from the Basel Committee on Banking Supervision, published on the website of the Bank for International Settlements in April 2013.

The issue's second paper, "Communities and driver nodes in the TARGET2 payment system" by Marco Galbiati and Lucian Stanciu-Viziteu, studies the network of properties of TARGET2. Its contribution is twofold. The first concept developed focuses on so-called driver nodes, which can be used to identify systemically important participants within TARGET2. With their approach, which involves a version of the PageRank algorithm, the authors find "large" participants thatwould not have been found when only looking at standard centrality measures. Second, the authors investigate clusters of participants within the TARGET2 network with intense payment activity (the so-called communities). The payment traffic within such communities represents a large portion of total TARGET2 payments, dependent on the temporal aggregation (daily or monthly communities).

Robert T. Cox, in his Forum contribution "Cave quid optes: waterfalls and central counterparty capital", explores the lines of defense of a central counterparty. In light of the 2009 Pittsburgh G20 declaration on the central clearing obligation, the author examines the lines of defence ("the waterfall") of a central counterparty (CCP) inter alia in the context of the requirements set by the Principles for Financial Market Infrastructures. He also focuses on the early placement of the CCP's own capital (the so-called skin in the game) within the waterfall.

The topic of this Forum paper is very interesting, and we have therefore decided to study this (and other related topics that concern CCPs) further in the journal. Please click here to see the full call for papers for a special issue that will focus on CCP stress testing, default management of CCPs and resolution regimes for CCPs. We are delighted that Jeff Stehm from Promontory Financial Group LLC has taken up the role of guest editor for this issue. We therefore invite our readers worldwide to submit papers to this special issue.

I hope you enjoy reading this issue of The Journal of Financial Market Infrastructures.

Ron Berndsen
De Nederlandsche Bank and Tilburg University

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