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franz edelman award 2010


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franz edelman award 2010

  1. 1. Study on Franz Edelman Award Presented by Alvin T.Y.BABU MBA in Engineering OperationsModule Leader: Asst. Prof K.M. Sharath Kumar M. S. Ramaiah School of Advanced Studies 1
  2. 2. Aim and ObjectivesAim : To study on Franz Edelman Award 2010 by IndevealObjectives :  To study the literature survey on the importance of Franz Edelman Award 2010 by Indeveal  To understand the study of the Franz Edelman Award 2010 by Indeveal  To analyse the study on Franz Edelman Award 2010 by Indeveal  To conclude the study on Franz Edelman Award 2010 by Indeveal M. S. Ramaiah School of Advanced Studies 2
  3. 3. Introduction to Franz Edelman AwardFranz Edelman is the fathers of innovation in OR/MS.Edelman dedicated his career to facilitating better decisions onmatters great and small through operations research.Today, his discoveries, along with other OR/MS pioneers,inspire initiatives to help leaders get better results in everysector of management and operations.This top INFORMS practice prize was named after FranzEdelman shortly after his death in 1982. M. S. Ramaiah School of Advanced Studies 3
  4. 4. Franz Edelman Award 2010 CompetitorsThe six 2010 Franz Edelman finalists are:1. The Delaware River Basin Commission for “Improving Water Release Policies on the Delaware River through Operations Research”2. Deutsche Postal DHS for “Global Brand Assessment”3. Indeval4. New Brunswick Canada Department of Transportation for “Achieving Transportation Asset Management via Operations Research”5. Procter & Gamble for “Inventory Optimization at Procter & Gamble: Achieving Real Benefits Through User Adoption of Inventory Tools”6. Sasol for “Stochastic Operations Models at Sasol” M. S. Ramaiah School of Advanced Studies 4
  5. 5. 2010 Franz Edelman Award WinnerS.D. Indeval with Instituto Technológico Autónomo deMéxico (ITAM) and Banco de México (Banxico) for“Indeval Develops a New Operating and Settlement SystemUsing Operations Research”Using O.R., this company decreased liquidity requirementsby $130 billion per day! M. S. Ramaiah School of Advanced Studies 5
  6. 6. Introduction to CompanyOn April 28, 1978, the first securities depository in Mexico wasofficially incorporatedUnder the name "Instituto para el Depósito de Valores"(SecuritiesDepository Institution)A Government agency with its own legal identity and capital.The institution first received securities on deposit on October 1979On July 21, 1987, the privatization of securities depository services inMexico was announced in the Official Gazette of the Federation,On August 20 of that year the institution was legally incorporated as aprivate corporation, changing its name to S.D. Indeval, S.A. de C.V.It began operations in its new capacity on October 1 of that year. M. S. Ramaiah School of Advanced Studies 6
  7. 7. General ObjectivesTo provide maximum security for the securities market inaspects relating to the custodyAdministration and transfer of securities and the clearing andsettlement of transactions performed in the marketStriving to offer the greatest benefit possible for depositorsand to optimize investors profit on their investments M. S. Ramaiah School of Advanced Studies 7
  8. 8. Business NeedMexican financial institutions were challengedBy reserve requirements and high borrowing costsnecessitated by INDEVAL’s securities settlement system,Smaller institutions could not afford to participate in thefinancial markets. M. S. Ramaiah School of Advanced Studies 8
  9. 9. Key Requirements For The New SystemIn 2005, Indeval, the Mexican Central Bank and ITAM beganimplementing a safer, reliable, and efficient SSS.The two key requirements for the new system were:1) Efficient management of resources through “netting,” sincehaving an SSS that can function with minimal resources isinvaluable during financial crises when liquidity is scarce; and2) Real time settlement to meet ever-increasing demands forintraday liquidity and for better risk management tools. M. S. Ramaiah School of Advanced Studies 9
  10. 10. Tools and Technique QualityBudget Time Project Management M. S. Ramaiah School of Advanced Studies 10
  11. 11. StrengthINDEVAL, Mexico’s central securities depository, wasoperating with 9-14 different settlement systemsThat complicated near real settlement of transaction.And it also limited liquidity and forced financial institutionsto reserve substantial financial resources in order to settlesecurities transactions,Raising costs for smaller players and making it difficult forthem to participate M. S. Ramaiah School of Advanced Studies 11
  12. 12. Raising liquidity and decreasing costsEarly on, INDEVAL had to decide what type of Securitiessettlement systems it would developSSS are generally conducted according to one of three modelsas identified by the BIS and the Committee on Payment andSettlement Systems, as follows:• Model 1: real-time gross settlement for all operations• Model 2: real-time delivery of securities and net settlementof cash at the end of the settlement cycle, usually at the end ofthe day• Model 3: net settlement of both securities and payments atthe end of the settlement cycles M. S. Ramaiah School of Advanced Studies 12
  13. 13. Model 1Previously, INDEVAL operated with a Model 1 systemIn the Model 1 gross settlement system, the individual seller (or itsbank) delivers the securities to the individual buyer (or its bank) andthe cash flows in the opposite direction.It is easy to link the delivery of securities to the correspondingpayment but it requires depositors to have adequate financialresources available to settle their trades.Financial institutions must borrow funds to support transactions ifthey do not have sufficient funds to settle transactions, which raisesborrowing fees and limits liquidity M. S. Ramaiah School of Advanced Studies 13
  14. 14. Model 2With Model 2 type of settlementA bank settles trades of a particular security among its owncustomers and then transfersThe net number of shares still outstanding to a counterparty bankto settle trades between customers.Settlement of the cash is treated the same way, however it is notdone until the end of the day which is riskier.As in the first model, banks may have to borrow securities tosettle the transfers. M. S. Ramaiah School of Advanced Studies 14
  15. 15. Model 3In Model 3which nets the settlement of both securities and payments at theend of the settlement cycleIt is the most desirable solutionIf the time between settlement cycle can be reduced to a shortamount of time.To develop the optimal solution, INDEVAL built a Model 3SSSwhich nets securities and cash in near real time, settling tradesas quickly as possible after they occur, without incurringborrowing costs. M. S. Ramaiah School of Advanced Studies 15
  16. 16. SolutionNew securities settlement system adopting internationalsettlement best practices using operations research tomaximize the value of settled trades which come frommyriads of securities transactions in near real time. M. S. Ramaiah School of Advanced Studies 16
  17. 17. Strategy Isolation process Parallel testing with Central BankIndustry wide Parallel testing Communication Coordination strategy Steering Committee Training M. S. Ramaiah School of Advanced Studies 17
  18. 18. DaliHighly reliableSecureEfficientIntegratedInnovativeFaster time to market M. S. Ramaiah School of Advanced Studies 18
  19. 19. Benefits 240 million USD in 18 months saved in borrowing costs for Mexican financial institutions 52% reduction in liquidity requirements for banks , 26% reduction in securities required for settlement Strengthening of Mexican financial system, especially during 2008 financial crisis Additional benefits include a safe mechanism to transfer money from the Central Bank to meet obligations in other payment systems And an effective tool for depositors to close their risk positions swiftly for better risk management. M. S. Ramaiah School of Advanced Studies 19
  20. 20. ConclusionThrough Innovative ideaThey all team members were worked together co-ordination with co-operationFinally they achieved the Edelman award with the TEAM work T - Together E - Every one A - Accomplish M – More M. S. Ramaiah School of Advanced Studies 20
  21. 21. References[1] Unknown, “ INDEVAL saves Mexican banks 240 million USD in 18 months”, 8C8MGZ?OpenDocument&Site=default&cty=en_us, Retrieved on 24th Feb’ 2012.[2] Unknown, “Edelman Award”, august-2010/130-edelman-award-safe-secure-securities-settlement, Retrieved on 24th Feb’ 2012.[3] Unknown, “Mexico’s Indeval wins INFORMS Edelman Award”,, Retrieved on 27thy Feb’2012.[4] Unknown, “S.D.Indeval”, html, Retrieved on 28th Feb’ 2012.[5] Unknown., “General Objectives”, eneral.html, Retrieved on 1st Mar’ 2012.[6] Unknown, “Franz Edelman Award”, Excellence/Franz-Edelman-Award, Retrieved on 2nd Mar’2012.[7] Unknown, “Indeval”,, Retrieved on 4th Mar’ 2012. M. S. Ramaiah School of Advanced Studies 21
  22. 22. Thank You M. S. Ramaiah School of Advanced Studies 22