rates. in particular, the ultimate effect on inflation is unclear. do short - term rate fluctuations affect mone ‐ tary transmission in a meaningful way? and if so, what degree of fluctuations? examining this in more detail could deliver valuable input for future policy discussions. be assured that compelling research in this field would surely kick down doors at central banks. and it would help us understand how important it really is to keep rate volatility contained in the pursuit of the primary objective of price stability. what about the open market economy principle? in our current and future operational framework, all eligible banks can borrow at the same rate, provided they pledge suffi ‐ cient eligible collateral and fulfil certain minimum criteria concerning their financial soundness. in bank funding markets, by contrast, banks have to pay different interest rates depending on their financial soundness. in principle, this rate differentiation steers the allocation of funds in the economy, pro ‐ vides incentives for banks to strengthen their balance sheets, and contributes to making the banking system more efficient and stable overall. at the same time, it reduces the burden on the central bank to decide who is a trustworthy counterparty – and increases the responsibility of the market. these benefits of more market activity are rather intan ‐ gible and thus notoriously difficult to quantify. but i guess everyone can agree that more market - based funding favours an efficient allocation of resources. currently, money market participants price most unsecured overnight transactions at a narrow spread of zero to ten basis points. for this segment, the future spread of 15 basis points seems enough to provide economic incentives for some market activity. most of these transactions currently take place between banks and non - banks. interbank transactions might need higher spreads. but in the longer - term money market segments, a spread of 15 basis points might risk pricing many transactions out of the market which can still take place at a wider spread. the narrower spread might have a direct impact on liquidity regulation as well. banking regulation requires euro area banks to fulfil certain liquidity requirements. most importantly, they have to hold a minimum stock of high - quality liquid assets ( hqla ( high quality liquidity assets ) ) against their net liquidity outflows over the next 30 days. one way to meet these requirements is to borrow reserves from the eurosystem, which are defined as hqla ( high quality liquidity assets ), against nonhqla ( high quality liquidity assets

systems. since the european systems for the cross - border use of securities are not yet fully designed, the central banks are preparing the what is known as correspondent central banking model ( ccbm ), with the foreign central bank acting as correspondent. the ccbm will serve as an interim solution for the cross - border use of securities until a private sector system has been put in place. a private system of this kind is the solution of the european central securities depository association ( ecsda ), using bilateral links between the domestic and foreign central securities depositories with an efficiency comparable to that of target. taking an overall view of payment systems at the beginning of next year, target will not be the only european scheme ; there will also be several net settlement systems. owing to their net characteristics, those systems cannot provide an immediate finality of payments. participants not fulfilling their due payments may - under certain circumstances - even cause an unwinding of all transactions. allowing, on the one hand, for liquidity - saving through the netting of payment orders, there is, on the other hand, the risk of a liquidity trap since the settlement is final only at the end of the business day. the operators of net settlement systems, which are for example the eba clearing, the eaf 2 and snp ( systeme net protege ) have their own individual strategy for preparing for stage three of emu. at all events, some changes will be brought about by the lamfalussy standards and the requirement for cross - border net systems to settle in central bank money. the choice and, ultimately, the success of the different schemes will depend on issues such as liquidity demand, early finality, security and, last but not least, availability characterised by execution times, operating hours and days. cost and fees for participation in payment systems are another factor which cannot be considered unimportant. looking at the european payment systems of the future, allow me to make a forecast from my personal point of view. at the moment, the future development of coexisting payment and settlement systems is still undecided. but some trends towards the respective systems can be identified. target as the central banks ’ gross system will be the basis for all large - value monetary policy transactions. bearing in mind that all cross - border payments of large amounts will be best served by processing through target due to the immediate finality of payments in this system, central banks will also act as a settlement provider for other