2010 Edelman Winner INDEVAL

INDEVAL Develops a New Operating and Settlement System Using Operations Research

The S.D. INDEVAL InstituciĆ³n para el DepĆ³sito de Valores, S.A. de C.V (INDEVAL), Mexico's Central Securities Depository and Securities Settlement System, implemented a new operating system to achieve best international practices, using operations research techniques. Best practices include: high capacity and reliability, real-time settlement, Delivery versus Payment (DvP), secure data storage and communications (based on the ISO15022), and operational transparency. This paper presents the problem definition, a linear programming model and a system simulation, along with a major business process modeling devised for the new system. The novel application of operations research techniques has produced several benefits including: (i) analysis and testing of the DvP settlement mechanism that processes transactions quickly and efficiently, with optimal use of available cash and securities balances, (ii) a secure, reliable and automatic clearing and settlement engine, that operates continuously and efficiently handles all transactions that INDEVAL receives from its participants, (iii) an intelligent and customized pre-settlement function that controls the execution of the clearing and settlement process using business rules and parameters. The new system settles securities operations that average over U.S. $250 billion daily, and its successful implementation is a major improvement in Mexico's financial system.