UBS and CIBC execute ‘world’s first’ intraday FX swap on regulated venue
30 July 2024 UK
Image: BillionPhotos.com/stock.adobe.com
UBS and CIBC have settled “the world’s first” intraday FX swap to be executed on a regulated venue.
The EUR/USD FX swap, negotiated using the Finteum Platform and executed on the TP ICAP UK MTF, was completed within minutes.
The banks settled both legs of the swap at pre-agreed times, within the same business day (T+0).
Anthony Clark-Jones, who leads the strategic ventures portfolio at UBS Investment Bank, says: “This world-first trade over Finteum is another step towards institutions and their partners realising the commercial, risk-associated and client-related benefits of truly digital capital markets, and compliments recent progress elsewhere with, for example, institutional digital cash and digital collateral.”
Finteum is a London-based start-up, which built an interbank order and trade management platform for intraday funding, using FX swaps and repo as financial products.
According to the firm, this new approach promises to deliver a significant saving for major banks.
With few solutions to control the receipt of funds within a settlement window, Finteum indicates that bank treasury teams maintain large buffers of high quality liquid assets (HQLA) for intraday — creating costs of up to US$75 million per year for a large bank.
Rupert Hume-Kendall, vice-chair and board member at Finteum, 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 and we’re excited to be working with many of the world’s largest banks to bring this new technology to fruition and reduce their costs.”
The Finteum Platform specialises in T+0 trades, which enable banks to meet customer obligations more quickly, reduce their HQLA requirements and meet increasing regulatory expectations to fund payment activity in real time.
The solution uses R3’s Corda, an open, permissioned, distributed platform for regulated markets.
Distributed ledger technology (DLT) enables both parties to send money and securities to each other, without needing to exchange and reconcile MT300 or similar confirmation messages.
Kate Karimson, chief commercial officer at R3, says: “R3’s Corda is designed for regulated markets, facilitating interoperability and integration.
“We are pleased to be supporting another innovation in market structure with the launch of Finteum’s intraday FX swaps and intraday repo solution, which will maximise the efficiency of this exciting new market.”
Finteum can integrate with any market infrastructure, including real-time gross settlement (RTGS), T2S, as well as DLT-native technology like the Fnality Payment System, HQLAX, Partior, and OSTTRA’s PvP Settlement Orchestration solution.
The trade flow solution, utilised by Finteum and TP ICAP, enables transactions to be arranged off-venue and subsequently executed and registered on a multilateral trading facility (MTF).
The platform also allows post-trade actions, such as 'early maturity’ or cancellation of a trade.
The Financial Conduct Authority (FCA) has recently registered Finteum as an appointed representative, enabling its platform to be used for arranging interbank transactions.
A Finteum Platform trial, conducted in April for USD intraday repo with 14 global bank participants and simulated settlement, demonstrated the potential of the intraday repo market.
The company expects live Finteum Platform repo trades later this year.
The EUR/USD FX swap, negotiated using the Finteum Platform and executed on the TP ICAP UK MTF, was completed within minutes.
The banks settled both legs of the swap at pre-agreed times, within the same business day (T+0).
Anthony Clark-Jones, who leads the strategic ventures portfolio at UBS Investment Bank, says: “This world-first trade over Finteum is another step towards institutions and their partners realising the commercial, risk-associated and client-related benefits of truly digital capital markets, and compliments recent progress elsewhere with, for example, institutional digital cash and digital collateral.”
Finteum is a London-based start-up, which built an interbank order and trade management platform for intraday funding, using FX swaps and repo as financial products.
According to the firm, this new approach promises to deliver a significant saving for major banks.
With few solutions to control the receipt of funds within a settlement window, Finteum indicates that bank treasury teams maintain large buffers of high quality liquid assets (HQLA) for intraday — creating costs of up to US$75 million per year for a large bank.
Rupert Hume-Kendall, vice-chair and board member at Finteum, 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 and we’re excited to be working with many of the world’s largest banks to bring this new technology to fruition and reduce their costs.”
The Finteum Platform specialises in T+0 trades, which enable banks to meet customer obligations more quickly, reduce their HQLA requirements and meet increasing regulatory expectations to fund payment activity in real time.
The solution uses R3’s Corda, an open, permissioned, distributed platform for regulated markets.
Distributed ledger technology (DLT) enables both parties to send money and securities to each other, without needing to exchange and reconcile MT300 or similar confirmation messages.
Kate Karimson, chief commercial officer at R3, says: “R3’s Corda is designed for regulated markets, facilitating interoperability and integration.
“We are pleased to be supporting another innovation in market structure with the launch of Finteum’s intraday FX swaps and intraday repo solution, which will maximise the efficiency of this exciting new market.”
Finteum can integrate with any market infrastructure, including real-time gross settlement (RTGS), T2S, as well as DLT-native technology like the Fnality Payment System, HQLAX, Partior, and OSTTRA’s PvP Settlement Orchestration solution.
The trade flow solution, utilised by Finteum and TP ICAP, enables transactions to be arranged off-venue and subsequently executed and registered on a multilateral trading facility (MTF).
The platform also allows post-trade actions, such as 'early maturity’ or cancellation of a trade.
The Financial Conduct Authority (FCA) has recently registered Finteum as an appointed representative, enabling its platform to be used for arranging interbank transactions.
A Finteum Platform trial, conducted in April for USD intraday repo with 14 global bank participants and simulated settlement, demonstrated the potential of the intraday repo market.
The company expects live Finteum Platform repo trades later this year.
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