UBS and CIBC have settled the world’s first intraday FX swap executed on a regulated venue. Finteum, which provided the DLT platform on which the swap was negotiated, reveals in a press release that the euro/USD transaction was “completed within minutes”, with both legs settled within the same business day on T+0. It was executed on the TP ICAP UK multilateral trading facility (MTF).
Finteum’s DLT-enabled platform allows FX swaps to be completed in hours instead of days. Because there are “few solutions to control the receipt of funds within a settlement window”, bank treasuries tend to maintain large buffers of high quality liquid assets (HQLA) for intraday swaps. This tighter settlement window represents a potential for significant savings for major banks, as it reduces the HQLA requirements. HQLA is expensive for banks to hold, especially in the current interest rate environment.
New possibilities
Finteum recently became an appointed representative under the UK’s Financial Conduct Authority (FCA), giving it the right to arrange interbank transactions. The new solution allows transactions to be arranged off-venue and executed and registered on an MTF.
Finteum vice-chair Rupert Hume-Kendall says, “Recent regulatory focus has highlighted the need for banks to have access to multiple tools and sources of liquidity. Intraday FX swaps and intraday repo are recognised to be an increasingly important part of liquidity management strategies at global banks.”
More to come
The banks using Finteum are currently settling trades with existing real-time gross settlement (RTGS) systems for intraday FX swaps, but the platform is built to “integrate with any market infrastructure”, including T2S and DLT-native technology such as Fnality Payment System, Partior, and OSTTRA’s payment-versus-payment (PvP) settlement orchestration solution. The plan is for member banks to transition from RTGS systems to PvP solutions “when appropriate”.
Finteum reveals that a second wave of banks will go live on the platform this year.
