arXiv subjects

Lee Braine

Publications and source records attributed to Lee Braine.

10 recordsLinked to original sources

arXiv2024

Anchoring UK Retail Digital Money

In the UK, the Bank of England and HM Treasury are exploring a potential UK retail CBDC, the digital pound, with one of their motivations being the potential role of the digital pound as an anchor for monetary and financial stability. In this paper, we explore three elements for anchoring money (singleness of money, official currency as the unit of account, and safety and soundness of financial institutions and payment systems) that maintain public trust and confidence in private UK retail digital money and the financial system. We also identify core capabilities (comprising on-demand interoperability across issuers and forms of private money, settlement finality in wholesale central bank money, and access to physical cash) and appropriate measures (comprising customer funds protection, robust regulation, effective supervision, safe innovation in money and payments, and the central bank as the lender of last resort) that together provide the foundations for the three elements for anchoring money. Our preliminary analysis concludes that anchoring private UK retail digital money is supported by these elements, capabilities and measures. Further work could include public-private collaboration to explore anchoring all forms of UK retail digital money.

econ.GN↗

arXiv2024

Payments Use Cases and Design Options for Interoperability and Funds Locking across Digital Pounds and Commercial Bank Money

Central banks are actively exploring retail central bank digital currencies (CBDCs), with the Bank of England currently in the design phase for a potential UK retail CBDC, the digital pound. In a previous paper, we defined and explored the important concept of functional consistency (which is the principle that different forms of money have the same operational characteristics) and evaluated design options to support functional consistency across digital pounds and commercial bank money, based on a set of key capabilities. In this paper, we continue to analyse the design options for supporting functional consistency and, in order to perform a detailed analysis, we focus on three key capabilities: communication between digital pound ecosystem participants, funds locking, and interoperability across digital pounds and commercial bank money. We explore these key capabilities via three payments use cases: person-to-person push payment, merchant-initiated request to pay, and lock funds and pay on physical delivery. We then present and evaluate the suitability of design options to provide the specific capabilities for each use case and draw initial insights. We conclude that a financial market infrastructure (FMI) providing specific capabilities could simplify the experience of ecosystem participants, simplify the operating platforms for both the Bank of England and digital pound Payment Interface Providers (PIPs), and facilitate the creation of innovative services. We also identify potential next steps.

cs.CY↗

arXiv2023

Functional Consistency across Retail Central Bank Digital Currency and Commercial Bank Money

Central banks are actively exploring central bank digital currencies (CBDCs) by conducting research, proofs of concept and pilots. However, adoption of a retail CBDC can risk fragmenting both payments markets and retail deposits if the retail CBDC and commercial bank money do not have common operational characteristics. In this paper we focus on a potential UK retail CBDC - the "digital pound" - and the Bank of England's "platform model". We first explore how the concept of functional consistency could mitigate the risk of fragmentation. We next identify the common operational characteristics that are required to achieve functional consistency across all forms of regulated retail digital money. We identify four design options based on the provision of these common operational characteristics by the central bank, payment interface providers, technical service providers or a financial market infrastructure. We next identify architecturally significant use cases and select key capabilities that support these use cases and the common operational characteristics. We evaluate the suitability of the design options to provide these key capabilities and draw insights. We conclude that no single design option could provide functional consistency across digital pounds and commercial bank money and, instead, a complete solution would need to combine the suitable design option(s) for each key capability.

cs.CY↗

arXiv2022

Industry Adoption Scenarios for Authoritative Data Stores using the ISDA Common Domain Model

In this paper we explore opportunities for the post-trade industry to standardize and simplify in order to significantly increase efficiency and reduce costs. We start by summarizing relevant industry problems (inconsistent processes, inconsistent data and duplicated data) and then present the corresponding potential industry solutions (process standardization, data standardization and authoritative data stores). This includes transitioning to the International Swaps and Derivatives Association Common Domain Model (CDM) as a standard set of digital representations for the business events and processes throughout the life cycle of a trade. We then explore how financial market infrastructures could operate authoritative data stores that make CDM business events available to broker-dealers, considering both traditional centralized models and potential decentralized models. For both types of model, there are many possible adoption scenarios (depending on each broker-dealer's degree of integration with the authoritative data store and usage of the CDM), and we identify some of the key scenarios.

cs.CY↗

arXiv2022

Illustrative Industry Architecture to Mitigate Potential Fragmentation across a Central Bank Digital Currency and Commercial Bank Money

Central banks are actively exploring central bank digital currencies (CBDCs) by conducting research, proofs of concept and pilots. However, adoption of a CBDC can risk fragmenting both payments markets and retail deposits. In this paper, we aim to provide a mitigation to this fragmentation risk by presenting an illustrative industry architecture that places CBDCs and commercial bank money on a similar footing. We introduce the concept of ecosystems providing a common programmability layer that interfaces with the account systems at both commercial banks and the central bank. We focus on a potential UK CBDC, including industry ecosystems interfacing with commercial banks using Open Banking application programming interfaces.

cs.CY↗

arXiv2021

Simulation of Derivatives Post-Trade Services using an Authoritative Data Store and the ISDA Common Domain Model

In this paper, we present a summary of the design and implementation of a simulation of post-trade services for interest rate swaps, from execution to maturity. We use an authoritative data store (ADS) and the International Swaps and Derivatives Association (ISDA) Common Domain Model (CDM) to simulate a potential future architecture. We start by providing a brief overview of the CDM and the lifecycle of an interest rate swap. We then compare our simulated future state architecture with a typical current state architecture. Next, we present the key requirements of the simulated system, several suitable design patterns, and a summary of the implementation. The simulation uses the CDM to address the industry problems of inconsistent processes and inconsistent data, and an authoritative data store to address the industry problem of duplicated data.

cs.CY↗

arXiv2020

Simulating an Object-Oriented Financial System in a Functional Language

This paper summarises a successful application of functional programming within a commercial environment. We report on experience at Accenture's Financial Services Solution Centre in London with simulating an object-oriented financial system in order to assist analysis and design. The work was part of a large IT project for an international investment bank and provides a pragmatic case study.

cs.CE↗

arXiv2019

Quantum Algorithms for Mixed Binary Optimization applied to Transaction Settlement

We extend variational quantum optimization algorithms for Quadratic Unconstrained Binary Optimization problems to the class of Mixed Binary Optimization problems. This allows us to combine binary decision variables with continuous decision variables, which, for instance, enables the modeling of inequality constraints via slack variables. We propose two heuristics and introduce the Transaction Settlement problem to demonstrate them. Transaction Settlement is defined as the exchange of securities and cash between parties and is crucial to financial market infrastructure. We test our algorithms using classical simulation as well as real quantum devices provided by the IBM Quantum Computation Center.

quant-ph↗

arXiv2017

Smart Contract Templates: foundations, design landscape and research directions

In this position paper, we consider some foundational topics regarding smart contracts (such as terminology, automation, enforceability, and semantics) and define a smart contract as an automatable and enforceable agreement. We explore a simple semantic framework for smart contracts, covering both operational and non-operational aspects, and describe templates and agreements for legally-enforceable smart contracts, based on legal documents. Building upon the Ricardian Contract, we identify operational parameters in the legal documents and use these to connect legal agreements to standardised code. We also explore the design landscape, including increasing sophistication of parameters, increasing use of common standardised code, and long-term research.

cs.CY↗

arXiv2016

Smart Contract Templates: essential requirements and design options

Smart Contract Templates support legally-enforceable smart contracts, using operational parameters to connect legal agreements to standardised code. In this paper, we explore the design landscape of potential formats for storage and transmission of smart legal agreements. We identify essential requirements and describe a number of key design options, from which we envisage future development of standardised formats for defining and manipulating smart legal agreements. This provides a preliminary step towards supporting industry adoption of legally-enforceable smart contracts.

cs.CY↗