Instrumented Interconnecteds Intelligent

During most of the history of computing, technology advances typically trickled down slowly from developed economies to emerging ones. The explosion of mobile telephony changed all that. Suddenly, tens of millions of mobile phone customers in emerging nations such as India and China not only skipped land lines and went straight to wireless networks, but they also began using new features such as mobile banking and payments before some of their developed-nation counterparts. Now the shift is starting to happen with enterprise-class technologies. A financial securities project in Mexico shows how.

Indeval, a privately-held company that manages the central securities depository and trade settlements for Mexico’s financial markets, is pioneering near-real-time securities trade settlements with a system called Dalí. The system makes it possible to settle trades in seconds, reducing risks for the parties involved and cutting in half the amount of money institutions must have on hand to cover trades. As a result, Mexican banks have saved more than $240 million in interest in 18 months.

At the heart of Dalí is IBM’s ILOG CPLEX optimization software. Its algorithms match thousands of transactions simultaneously, so that only net amounts of securities and cash need to be transferred among the participating financial institutions.

Dalí settles more than $250 billion in securities trades per day, representing about 20% of Mexico’s GDP. It’s  the first system anywhere that operates a near-real-time trade settlement model. “Mexico now has a very efficient system, notwithstanding any other system in the world,” says Jaime Villaseñor, Indeval’s chief risk officer and the leader of the Dalí project.

Thanks to its stellar results, Dalí is getting the attention of other bank monitors around the world and winning accolades from operations research experts. Earlier this year, for example, Indeval won the prestigious Franz Edelman award from The Institute for Operations Research and Management Sciences.

The shift to near-real-time settlements won’t happen overnight, though. That’s because most settlement systems in use around the world now employ complex, multi-step processes. To streamline them and add powerful new analytics features, settlement organizations will have to  fundamentally transform the way they do business–which can be expensive and risky. In some ways, its easier for institutions in emerging markets to make big bets like this, since, often, they have less to undo. So you can expect this sort of financial innovation to come to other emerging markets earlier than developed ones.

Securities trade settlements is just one example of an emerging market leapfrogging in enterprise technology. Now that China and India are establishing themselves as two of the leading global economies, more frogs will be leaping.

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February 23, 2011
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December 28, 2010
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