Multilateral Offsetting algorithm in case banks with insufficient settlement liquidity exist a) MLOS algorithm continuously calculates the total net position among queued instruction. b) When the designated time comes, MLOS tries to settle the calculated total net position. In case the RTGS a/c balance of all the participants will become positive, all queued transactions are settled simultaneously to finish process. In case of participants with a negative RTGS a/c balance, proceed to c). c) Remove the queued instructions of the participant with a negative a/c amount until it becomes positive. The queued instructions that should be removed are specified in descending order of settlement amount. (In case two or more instruction with the same settlement amount exist, the lower queued instruction preferentially should be removed.) Continue these processes for all the participants with negative RTGS a/c balance until their RTGS a/c balance become positive. d) After the completion of c), retry settlement as b). In case the participants with negative RTGS a/c balances exist, continue and proceed c) and b). Incidentally, all kinds of transactions with RTGS a/c are forced to wait during the settlement period described in b) and d). (in comparison, transactions with RTGS a/c can be processed during the MLOS calculation and clearing processes described in a), b), and c). Source: Preparatory Survey Team Figure 3-11 MLOS function overview (F) Queue management Participant FIs can manage their own queued payment instructions. When participant FIs send payment instructions in LSF mode, they can choose the priority as high or normal. If the newly incoming payment instruction cannot be settled, first, the instruction will be queued at the bottom of each priority queue. Participant FIs can change the queue order by using two parameters: one is priority change (normal/high), and another is change order (top/bottom). It allows them to process urgent queued payment instructions with “high” and “top.” They can also cancel the queued payment instructions. 38