IBM's decision automation software from its ILOG acquisition is powering the securities settlement system for all the financial institutions in Mexico.
central securities depository is using IBM
software that can settle securities trades in near real time, IBM
said Dec. 22. Rapid settlement means banks don't need to have as much cash on
hand to cover trades, which reduces the risk of financial losses, according to IBM.
central securities depository, is using Dali, a securities settlement system
IBM ILOG CPLEX Optimizer
software. IBM acquired this decision automation
and advanced analytics software as part of its 2008
acquisition of ILOG
Indeval manages securities on behalf of banks and individual investors after
the trade is finalized, according to Jaime Villasenor, chief risk officer at
Indeval. "We have to complete the delivery of the security and the
money," he told eWEEK. There are thousands and thousands of transactions
daily that have to be settled, he said.
In a recent settlement cycle, Indeval settled more than $70 billion in stock
trades in one minute.
Dali uses Optimizers to match thousands of transactions simultaneously so
that only net amounts of securities and cash need to be transferred among the
participating financial institutions. Pretty much all institutions that handle
securities trading are "directly or indirectly" part of the system
and there is "no other option," Villasenor said.
"It's rare that we get to see such scope and such performance,"
said Pierre Haren, from the IBM software
group and the former CEO of ILOG,
referring to the fact that the system covers more or less the whole country's
trading infrastructure. Focusing on the big picture allows customers to
"achieve bigger economies," he said.
The system has been in place for two years, according to Villasenor. The
improved trade settlement system has halved the amount of cash the banks have
to have on hand, saving Mexican banks more than $240 million in interest over
18 months, said Eduardo Gutierrez, software director of IBM's
Latin Caribbean operations.
The system has added stability to Mexico's
financial system and reduced the effects of fluctuating market conditions by
raising liquidity levels and lowering capital requirements for financial
institutions, said Villasenor.
Indeval's previous system required banks to have billions of dollars in cash
on hand while securities were being settled. Linking the delivery to the
corresponding payment requires depositors to have the money on hand, requiring
institutions to borrow if sufficient funds were not available at that time,
To build it, Indeval searched for new technologies that supported the
development of the rapid settlement system and were robust enough to rapidly
process "volumes of transactions," said Villasenor. The search led
them to IBM's ILOG
CPLEX Optimizer software.
"The ROI is stunning for the country," said Haren.
When the system was rolled out, Indeval conducted more than 200 training
sessions industrywide to familiarize all the users with the different aspects
of the system, Villasenor said. Along with the change in the actual settlement
process, there were a number of changes to business
that drove transaction settlement, he said. There were 14 different
fragmented processes that handled the settlement process under the old system,
but under the new system, they were consolidated into a robust and optimized
single process, he said.
Many airlines use CPLEX software for pricing seats on airplanes, according
to an IBM spokesperson, as the software
calculates what the price would be for a seat sold last-minute versus one a
week in advance.