A situation that can arise in a funds or securities transfer system in which the failure of some transfer instructions to be executed (due to insufficient funds or securities balances) prevents fulfillment of a substantial number of instructions given by other participants
Resolution of the gridlock condition without overdrawing the accounts involved.
Gridlock is a situation that frequently appears in real time systems when the settlement accounts liquidity is extremely volatile. The gridlock resolution algorithm is one of the most important parts of a real time settlement engine.
As references to understand more about gridlock and gridlock algorithms see the following:
[GRIPS] – Morten Linnemann Bech, Kimmo Soramäki – “Gridlock Resolu8on in Interbank
Payment Systems”, Bank of Finland Discussion Papers, 2001.
[SIM] – Harry Leinonen, Kimmo Soramäki – “Simula8ng interbank payment and securi8es
seBlement mechanisms with the BoF-PSS2 simulator”, Bank of Finland Discussion Papers, 2003.
[OPT] – Harry Leinonen, Kimmo Soramäki – “Op8mizing Liquidity Usage and SeBlement Speed
in Payment Systems”, Bank of Finland Discussion Papers, 1999.
[LGF] – Morten Linnemann Bech, Kimmo Soramäki – “Liquidity, gridlocks and bank failures in
large value payment systems”, Emoney ar5cle, 2002.
[EACIP] – Michael M. Giintzer, Dieter Jungnickel, MaNhias Leclerc – “Eﬃcient algorithms for the
clearing of interbank payments”, European Journal of Opera5onal Research, 1998
[OACIP] – Yakov M. Shafransky, Alexander A. Doudkin – “An op8miza8on algorithm for the
clearing of interbank payments”, European Journal of Opera5onal Research, 2006
[COL] – Joaquín Bernal R., Carolina Merlano G. – “Payment System policies and intraday liquidity
in a real 8me gross seBlement system: the Colombian case”, CEMLA The World Bank Western
Hemisphere Payments and Securi5es SeNlement Forum, 2005
This is a series of posts with definitions for the jargon used in #banking, #fintech and #payments.
Too many people use some terms without understanding them beyond the definition.
Too many “experts” use the terms but they never had experience with the actual implementation of anything in #banking, #fintech and #payments.