Bits & Bytes
As a market maker on the Chicago Board of Options
in the early 1980s, I was tasked with providing a
liquid market for options trading onlisted stocks. I
would stand in a trading pit (long since replaced by
computers) and buy and sell hundreds of contracts
in hopes ofmaking a small amount ofprofit. At the
end ofthe day, my trades — and millions ofother
trades — would “clear” (matched and paid as
verification of good funds by a ll participants)
overnight for fractions of pennies per trade so the
market would start the next day with all accounts up
to date. The exchanges were performing“sameday”
Also in the early
1980s, the Federal
House (ACH) func-
tiona lity, a perceived
extension to its
charter, to clear checks
at pa r. Ho wever, under
“checks” would be
paper-based. Like the
exchanges, the Fed
saw great risk and
inefficiency relying on a large, growing payment
system that used paper to move from a deposit bank
to an issuing bank — a point driven home during
September 11 when planes couldn’t fly paper checks.
The Fed’s promotion of ACH, including “
competition” with private clearing houses to increase
efficiency, has helped eliminate checks as a main
method of moving funds. But in this day of instant
access to information, the ACH system has become
inefficient, as it still takes two to three business days
for a payment to clear.
Consider this: Our methods of settling payments
have not changed materially in35 years! ACH has
become cheaper, but definitely not more efficient.
This year the Federal Reserve Board of Governors announced the Faster Payments Taskforce, a
group of more than 200 stakeholders tasked with
for warding the opportunities outlined in
its January 2015 white paper “Strategies for
Improving the U. S. Payment System” (www.
pdf). Basically, the Fed recognizes that the United
States, to the detriment of its competitiveness, has
relied on the ACH system and now severely lags
behind the rest of the world in the clearance of
Conexxus has been selected to participate in the
Fed’s ne wly formed taskforce as a representative for
retailers — a key stakeholder in the payments
system. Over the next 18 months Conexxus, with
the support of NACS, will be immersed in recasting
the U. S. payment system, pushing for competitive,
timely and cost-effective payments that benefit all
payment system stakeholders.
Conexxus is more than just standards — we help
shape the way consumers pay for things tomorrow.
Stay tuned for more information about our participation in the Fed’s Faster Pay ments Taskforce.
Gray O. Taylor
in 35 years!