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Optimization in Finance

SINTEF delivers software that is used daily by the Norwegian Stock Exchange to compute optimal clearing and settlement in the Norwegian financial market.

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All trades in financial instruments (e.g. stocks and bonds) are entered into the security settlement system. Then, during the night, all trades that are entered and matched on one day are settled simultaneously. Participants may have entered into more contracts than covered by securities or money at their disposal. Thus, not all trades can be settled, leading to the problem of deciding which trades to carry through. Our software solves this problem by maximizing the total value of the whole settlement, while at the same time ensuring that priorities among trades are respected. The optimization module is a cornerstone in VPS' settlement system.

SINTEF also develops and maintans a backup system to be used in the rare case that the main system cannot compute a solution to the settlement optimization problem (due to numerical instability).

Before the introducing of a CCP (Central CounterParty) in the Norwegian Market, the system would handle the following figures on peak days:

10.000 security accounts
500.000 transactions
50 cash accounts
Gross value 150 billion NOK (EUR 18,8 billion)
Running time: 20 minutes
After the introduction of a CCP in the Norwegian Market (2010) the settlement volumes have been reduced. Today, on a normal settlement cycle, the figures are:

10.000 security accounts
60.000 – 80.000 transactions
50 cash accounts
Gross value 100 billion NOK (EUR 12,5 billion)
Running time: 5 minutes

SINTEF Optimization webpages

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