The system with an LSM however also possesses some ‘bad’ equilibria. These feature the somehow paradoxical mix of high liquidity usage, intense use of the LSM, and costs which exceed those of the vanilla RTGS system. The reason behind the existence of such equilibria is probably the following: if many payments are sent in the LSM, this can be self-sustaining, in the sense that each bank finds it convenient to do so. However, the RTGS stream may become less expedite (as fewer payments are processed there), which may in turn imply that the equilibrium level of liquidity is also large
