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January 19th 2018: The Deferred Action for Childhood Arrivals (DACA) programme looks to be a continuing stumbling block for Democrats who were expected to ink the US government spending bill, with an attendant effect on the US dollar. According to Miles Eakers, chief market analyst at Centtrip the dollar continues to show weakness ahead of possible US government shutdown. “Late last night the House of Representatives passed concessions on a major increase in defence spending and a hardline immigration bill. But Senate Democrats said they would likely block the measure unless President Donald Trump and Republicans include protection for young immigrants. An impasse could result in Trump celebrating his first anniversary in office with the first shutdown in four years, despite his party holding a majority in both houses. After reports of the vote, [the market] saw continued, but muted, dollar weakness, pushing the GBP/USD pair back above $1.39 and EUR/USD nearer the $1.23 resistance level.” The question is now whether a short=term patch will be agreed today, or whether the Republicans and the White House will be compelled to get serious about a longer-term solution. The last time a short-term bill was passed was December last year, which passed by a grand majority of 66 votes to 32. This time round it looks more difficult - Mike van Dulken, Head of Research at Accendo Markets commented to clients this afternoon: “Equities are positive to close out the week, rebounding from a negative US close and ahead of a key Senate vote to stave off a government shutdown tonight. Weaker than expected UK Retail Sales have seen the UK’s blue-chip index take a leg higher, benefiting from Sterling's retreat from fresh post-referendum highs earlier this morning. Interestingly, Germany’s DAX is the rank outperformer, this in spite of additional Euro strength after hawkish ECB comments, whilst US equities point towards a positive open this afternoon. The FTSE has climbed higher thanks to GBP weakness benefiting names such as ULVR, BATS, SHP, RELX, CCL and GSK, while Miners are embracing the weaker USD's fillip for metals. This is easily offsetting weakness for BP (Oil lower on IEA report), HSBC (US forex fine), BT (pension scheme deal) and KGF (Carpetright profits warning). Germany’s DAX outperforms with just Linde in the red, as Thyssenkrupp, Adidas, BASF and Fresenius lead the way higher. The FTSE 100 has broken back above 7715. The DAX 30 has broken above 13350 to flirt with a 13420 breakout. Dow Jones Futures have rebounded to re-test 26055. Gold has broken back above $1332.” --

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The move to real time payments in the US takes a step forward Photograph © sakkmesterke /Dollarphotoclub.com, supplied February 2015.

The move to real time payments in the US takes a step forward

Monday, 23 February 2015
The move to real time payments in the US takes a step forward The Federal Reserve has described its roadmap to overhaul the US payments system, which includes plans for faster settlement in all payment categories and near real time settlement for peer to peer payments. The announcement is the latest step in an initiative begun in 2012. The Federal Reserve’s end-to-end vision encompasses the full payment chain from the point of origination to the point of receipt, including payment notification, reconciliation and interbank settlement. http://www.ftseglobalmarkets.com/media/k2/items/cache/72b16f49461de1143741e21142c66738_XL.jpg

The Federal Reserve has described its roadmap to overhaul the US payments system, which includes plans for faster settlement in all payment categories and near real time settlement for peer to peer payments. The announcement is the latest step in an initiative begun in 2012. The Federal Reserve’s end-to-end vision encompasses the full payment chain from the point of origination to the point of receipt, including payment notification, reconciliation and interbank settlement.

The US central bank has spent the intervening years to engage with stakeholders in the US payments system (including banks, credit unions, software vendors, payment processors, government agencies, trade associations and consumer organizations and corporations large and small). The central bank says it has no plans, at this point, to mandate rules for faster payments, but instead wants to harness the private sector to implement its recommendations, and develop the technology required ensure real time payments are secure.

Following an extended consultation period, which included sponsored qualitative and quantitative end-user research to study the meaning and importance of payment speed and other payment attributes to consumers and businesses, the Fed reports that over 75% of participants agreed that the following attributes would be important in a (near) real-time payments system. Participation must be ubiquitous (in other words, everyone has to be involved); senders do not need to know the bank account number of the recipient, confirmation of good funds is made at the initiation of the payment; sender and receiver receive timely notification that the payment has been made and funds are debited from the payer and made available in near-real time to the payee

However, several commenters asserted that (near) real-time payments should be pursued only if a clear business case exists and is supported by demonstrated end-user needs in targeted use cases. Also, some commenters noted that only certain elements of payments need to be faster (such as confirmation of good funds, notification of payment status, posting to the payer and payee) and that the specifics will depend on the circumstances surrounding the payment. Some commenters also suggested that the speed of interbank settlement should be more explicitly addressed in this desired outcome.

The Fed then sponsored more research designed to refine its design of an optimal system. Studies covered issues such as the demand for particular payment attributes across different use cases; (estimates of the number of payments that are likely to benefit from and migrate to a faster payments solution; and alternative approaches to improve the speed of US payments, including a (near) real-time retail payment system.

The central bank says it learned that payment speed is important to both consumers and businesses, and faster payments features are generally preferred to slower ones. “The faster payments analysis demonstrated that increased payment speed would initially benefit at least 29bn transactions per year, which is 12%of the total for the country.

Additionally, Fed staff said they see opportunities for expanding the National Settlement Service, which allows private businesses, such as financial institutions, to exchange and settle transactions through master accounts held at Federal Reserve banks. These net settlement arrangements allow businesses to batch settle wires and ACH transactions throughout the day between 7:30 a.m. and 5:30 p.m. ET. Currently, approximately 17 NSS arrangements have been established by financial-market utilities, check clearinghouse associations and automated clearinghouse networks.

By the end of 2016, the Fed plans to offer this type of net settlement on a 24/7 basis, essentially making NSS transactions real-time.

In a 58-page roadmap report, called Strategies for Improving the US Payment System, the Fed calls for establishing a task force that will advise the Fed about how to reduce payments fraud while also advancing resiliency of the payment system.

Payments security is a big worry for the industry, the report notes, pointing out that industry input collected over the last 18 months highlighted the need for the development of a fraud database. The Fed also notes that not all security and fraud concerns have yet been fleshed out, and that the security gaps noted in its report do not reflect a comprehensive list; more input from the industry is needed.

"Many [survey participants] suggested that the industry work together to develop a coordinated fraud database and to enhance other fraud information services," the report states. "Many also advocated for the development and adoption of standards for user and device authentication, tokenization, dynamic credentialing (like EMV) and encryption - especially if a (near) real-time payment solution is developed and implemented. Many believe consumers need better education and incentives to motivate them to make fraud-reducing payment choices."

The Fed also plans to launch a task force that will focus on best ways to implement faster payment capabilities through collaboration with the industry and consumers, the report notes.

To begin the next phase of industry engagement, Esther George, president of the Federal Reserve Bank of Kansas City and a member of the Federal Reserve's Financial Services Policy Committee, and Federal Reserve Board Governor Jerome H. Powell, who will co-chair the initiative's oversight committee, are hosting teleseminars in early February to present an overview of the strategies.

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