Global Finance Infrastructure

Actors, pipes, and how money moves

Buy-Side (Capital Owners)
Sell-Side (Intermediaries)
Infrastructure (FMIs)
Transaction Flows
EEA

Why This Document Exists

We often hear that Ethereum will become the infrastructure of the global economy. But to build that future, we need to understand how the current system actually works.

Too often, Web3 conversations skip over the real mechanics of global finance — the pipes that move $7 trillion in FX daily, settle $3.79 quadrillion in securities annually, and protect against counterparty failures that have taken down major banks.

This document is the EEA's contribution to closing that gap. If we want Ethereum to provide meaningful upgrades to financial infrastructure, we need to understand what we're improving — and why these systems were built in the first place.

The opportunity is real. So is the complexity.
$7.5T
Daily FX volume
$3.79Q
DTCC annual throughput
€40T+
Euroclear assets under custody
$19.1T
CLS single-day record
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Buy-Side
Where should we put money?

Owns capital and seeks returns. Makes allocation decisions. Pays for access to markets, liquidity, and execution.

Pension Funds Insurers Sovereign Wealth Funds Mutual Funds / ETFs Hedge Funds Private Equity Venture Capital Corporate Treasuries
⇄
Sell-Side
How do we package and distribute risk?

Manufactures liquidity and distributes products. Earns fees for providing market access, execution, and balance sheet.

Investment Banks Broker-Dealers Commercial Banks Market Makers Trading Firms Custodian Banks Prime Brokers

Infrastructure — The Pipes

Central Bank Rails

RTGS
Real-Time Gross Settlement
⚠ The Problem
When banks transfer money to each other, who guarantees the payment is real? A bank could promise $1B, receive goods, then fail before actually paying.
Real-World Failure
Continental Illinois, 1984: When this major US bank failed, other banks had billions in unsettled interbank payments at risk. The Fed had to intervene with $4.5B to prevent a chain reaction.
✓ How RTGS Solves It
Payments settle in central bank money — the only money with zero counterparty risk. Each transfer is final and irrevocable within seconds. Banks can only send what they have in their central bank account.
Key Operators
Fedwire
US ~$5T/day
TARGET2
Eurozone ~€2T/day
CHAPS
UK ~£400B/day
BOJ-NET
Japan ~¥400T/day

Card Networks

PSP
Payment Service Providers / Networks
⚠ The Problem
A merchant in Paris wants to accept payment from a tourist's US bank. They've never met, don't trust each other, and need instant authorization. Who guarantees the merchant gets paid? Who protects the consumer from fraud?
Why This Matters
Without networks: Every merchant would need bilateral agreements with every bank worldwide. Fraud liability would be unclear. Authorization would take days, not seconds.
✓ How Networks Solve It
Networks provide universal acceptance (one integration = millions of merchants), instant authorization, fraud protection with chargeback rights, and guaranteed merchant payment. They net millions of transactions and settle once daily.
Key Operators
Visa
Global ~$15T/yr
Mastercard
Global ~$9T/yr
UnionPay
China+ ~$18T/yr
Amex
Closed-loop ~$1.5T/yr

Exchanges

Trading Venues
Stock & Derivatives Exchanges
⚠ The Problem
You want to sell 10,000 shares of Apple. Someone in Tokyo wants to buy. How do you find each other? How do you know you're getting a fair price and not being front-run?
Pre-Exchange World
Before 1792: Stock trading happened in coffee houses. Prices varied wildly between dealers. Insider trading was rampant. The Buttonwood Agreement created the NYSE to establish fair, transparent pricing.
✓ How Exchanges Solve It
Central order books show all bids/offers. Price-time priority ensures fairness. Surveillance detects manipulation. Everyone sees the same price at the same time. Liquidity concentrates, reducing spreads.
Key Operators
NYSE
Equities $28T mkt cap
Nasdaq
Equities $25T mkt cap
CME Group
Derivatives ~$1Q notional/yr
LSE / Euronext
Europe €7T+ combined

Central Counterparties

CCP
Clearing Houses
⚠ The Problem
You agree to buy $100M in bonds from Bank X, settling in 2 days. Overnight, Bank X fails. You've already hedged your position. Now you're exposed AND need to find a new seller — possibly at a worse price.
Real-World Failure
Lehman Brothers, Sept 2008: $35T in derivatives, $600B+ in outstanding trades frozen overnight. Counterparties globally didn't know if trades would settle. CCP-cleared trades settled cleanly; bilateral trades took years to unwind in court.
✓ How CCPs Solve It
CCP becomes buyer to every seller, seller to every buyer. Collects margin daily (if you drop 5%, you post cash that day). Nets 1000 trades into 1 position. Maintains default fund from all members. If a member fails, CCP auctions their portfolio.
Key Operators
LCH
Multi-asset $2.5Q notional
CME Clearing
Derivatives ~3B contracts/yr
ICE Clear
Energy/CDS $35T+ notional
Eurex Clearing
Europe €12T+ notional

Securities Depositories

CSD / ICSD
Central Securities Depository / International CSD
⚠ The Problem
After clearing, the asset must actually move. But what if you send $100M and never receive the shares? Or send shares and never get paid? With millions of trades daily, how do you track who owns what?
The Paper Crisis
Wall Street, 1968: Trading volume overwhelmed back offices. Physical stock certificates were lost, stolen, or misdelivered. NYSE had to close on Wednesdays for months. $400M in securities simply "disappeared."
✓ How CSDs Solve It
Securities exist as electronic book entries, not paper. DvP (Delivery versus Payment) ensures atomic swap — you only get shares if payment clears, and vice versa. Single source of truth for ownership. Corporate actions processed automatically.
Key Operators
DTCC (DTC/NSCC)
US $3.79Q/yr
Euroclear
Int'l €40T AUC
Clearstream
Int'l bonds €16T AUC
JASDEC
Japan ¥700T+ AUC

FX Settlement

CLS / PvP
Continuous Linked Settlement / Payment vs Payment
⚠ The Problem
In FX, you're exchanging two currencies. You send €100M to a German bank at 9am Frankfurt time. They should send you $110M — but their US correspondent bank operates in New York, 6 hours behind. If they fail before NY opens, you've lost €100M.
The Defining Failure
Herstatt Bank, June 1974: German regulators closed Herstatt at 3:30pm Frankfurt (10:30am NY). Counterparties had already paid Deutschmarks but never received dollars. $620M frozen. This "Herstatt Risk" shaped FX infrastructure for 50 years.
✓ How CLS Solves It
PvP = both legs settle simultaneously or neither does. CLS holds both payments in escrow and releases only when both parties have funded. Eliminates principal risk entirely. Operates in a 5-hour window when all major markets overlap.
Key Operators
CLS
18 currencies >$7T/day avg
Peak Day
Jun 2024 $19.1T record
Settlement Members
Global banks 70+ direct
Risk Eliminated
Principal ~$7T/day

How Money Moves

💳 Card Purchase

~700M transactions/day globally
1 Tap card → Network routes to issuer
2 Issuer approves (fraud + funds + credit)
3 End of day: obligations netted
4 RTGS settles interbank final

📈 Stock Trade

~$500B/day on US equities alone
1 Order placed → Exchange matches
2 CCP becomes counterparty to both
3 CCP nets exposures + collects margin
4 CSD settles DvP (T+1 in US)

💱 FX Trade

$7.5T/day — largest market on Earth
1 Banks agree trade (spot/forward/swap)
2 Instructions sent to ops networks
3 CLS settles both legs (PvP)
4 Principal risk eliminated

Key Abbreviations

RTGS Real-Time Gross Settlement
CCP Central Counterparty (clearing house)
CSD Central Securities Depository
ICSD International CSD (cross-border)
DvP Delivery versus Payment
PvP Payment versus Payment (FX)
FMI Financial Market Infrastructure
AUC Assets Under Custody
T+1 Settlement one day after trade
DTCC Depository Trust & Clearing Corp.
CLS Continuous Linked Settlement
PSP Payment Service Provider

Where Blockchain Fits

✓ Addressable Opportunities

  • Cross-border payments (speed, cost, 24/7)
  • Atomic settlement (programmable DvP)
  • Collateral mobility and tokenized escrow
  • Transparent shared state across parties
  • Instant finality without batch windows

✗ Hard to Displace

  • Central bank finality (legal tender status)
  • CCP risk mutualization at trillion-dollar scale
  • Domestic securities law and ownership frameworks
  • Consumer protections and chargeback regimes
  • Regulatory and insolvency regimes