How can the FX industry reap the benefits of smart data?

The need for ‘smart data’

Operations in the financial industry have changed immensely over the past two decades since the advent of electronic trading. The multitude of electronic platforms that can now handle the volume of transactions in FX has opened up the market. Yet, the multiplicity of trading venues, the heterogeneity of technological interfaces and the variety of data protocols used across these platforms makes it difficult for FX participants to monitor market information and assess their risks in real time.

There has been a move by institutions to try and gather as much data and information as possible. However, the gathering of raw or ‘big data’ on its own is not enough. What market participants can now benefit from is ‘smart data’. This is data that has been normalised – i.e. standardised – and presented in a unified format. It’s a logical step that consistent transaction messaging language leads to more streamlined operations.

Artificial Intelligence (AI) can quickly identify erroneous and incomplete data and transform only the clean and enriched inputs into smart data that can be used across any part of an institution’s trading operations.

In an industry where time to market is imperative, the ability to license an already-available secure platform is a prudent option. The neutrality of a third-party supplier will engender trust in the data, can stimulate trading on the platform and link multi-asset participants to one source of liquidity. This will also allow for transparent benchmarking of prices and comparison of market share.

Why should the FX market care?

Developments in technology means that data can now be processed with practically zero latency. In J.P. Morgan’s latest e-trading survey, 82 per cent of respondents said that access to real-time data was the most important factor within the overall sphere of data services.

But having access to data is only part of the equation. Having the ability to gain insights through smart data in real-time, with guided options, enables the FX trader to make a judgement call on how to proceed. The ability to provide deeper insights drives customer loyalty and consequently leads to a more stable and profitable business.


Our client, Jack Jeffery, Chairman of Mosaic Smart Data, has spent more than three decades in the financial industry, with roles at EBS, ICAP, and MTS. He has also been a member of Bank Of England’s Joint Standing Committee and the Federal Reserve’s FX Committee.

Tradeteq calls for government action to improve trade finance distribution

Trade Finance in 2020

Our client Tradeteq, the London-based provider of technology and software solutions to the trade finance industry, has today published a whitepaper titled Trade Finance in 2020: Asset Distribution – A Macro-economic Necessity. The paper not only highlights how the current Covid-19 pandemic is putting greater strain on SMEs, but how a greater distribution of trade finance assets to non-bank investors will help small business weather this storm. 

Unsurprisingly, Tradeteq has identified SMEs amongst the worst hit by the current lockdown measures. As these businesses are less likely to receive Letters of Credit from banks during this period, the need for other options must be considered in order for these organisations to continue to operate during this period. Tradeteq’s solution is to distribute trade finance assets to non-bank investors helping both banks and businesses continue to function in this uncertain climate.   

Trade Finance in 2020: Asset Distribution – A Macro-economic Necessity

The paper also emphasises how distributing assets to alternative investors has the potential to unlock millions of dollars in liquidity, helping to plug the trade finance gap which currently stands at least US$1.5 trillion. This in turn will greatly reduce the risks banks have on their balances, creating new avenues for growth in the market. 

The distribution of assets to investors comes as a natural extension of Tradeteq’s credit scoring service.  The machine learning and Artificial Intelligence (AI) tools that enable Tradeteq to provide a rigorous, evidence-based credit score are also subsequently applied to gauging the risk of trade finance assets for investors when they purchase.   

This also coincides with the rapid growth of the Trade Finance Distribution Initiative (TFDI), for which Tradeteq is the technology infrastructure provider and which has nearly doubled its membership to 30 since launching in 2019. Through growing the members of the TFDI, the trade finance industry is making yet another vital step towards the improving the accessibility of liquidity to small businesses.  

Smart remote working

Covid-19 has created a large-scale working-from-home experiment with many businesses encouraging employees to work remotely until the virus poses less of a threat – Chatsworth is now one of many working from home.

While the communications sector is much more suited to remote working, without the right foundation, it can be a challenge to implement. It was important for us to make sure everyone at Chatsworth was prepared, supported and had the resources needed to make it work. So, we decided to share some of our thoughts on how we’re working during this period.

Being tech-savvy

With a large proportion of our clients working in fintech, we’d be pretty ineffective if we didn’t also have a tech-focused approach. This goes double when our team works remotely. Having our documents on a secure cloud server gives everyone access even if they’re not in the building, while still ensuring our clients’ information remains safe.

Client calls and meetings still need to happen, which is why we’re using platforms that allow conferences calls on both phone and over the internet. People’s working habits can change when they’re not in the office, so it’s important to make sure there are alternative options of communication for both our team and clients.

Having good chat

That sense of communication was vital to us when confirming that teams will be working from home. It’s very easy for remote working to become isolating, for employees to feel overburdened and for individual development or coaching to take a back seat. It was something we did not want to happen.

Opting for an instant messenger service was important for us, allowing the team to still share ideas, catch up and check in even when they’re not in the same room. While nothing can replace that direct interaction with another person, the option to have a video call or drop a voice message to someone can break down those barriers.

Keeping the office culture

Ultimately, it goes back to that whole idea of office culture. Even when working outside the building, people still need to feel connected, sharing those same things that make being part of Chatsworth so fun and engaging.

Managers are still catching up with their teams every day, colleagues haven’t stopped collaborating and we’re still making sure our clients are being supported. Our goal is to make things work so well that, even with the changes taking place within the modern office, things remain the same here at Chatsworth.

With many businesses stepping into the remote-working world for the first time, it will undoubtedly be a period for evaluation, change and growth. For us, we like to think we have a good setup – both for our clients and our people.

The petrol era in banking is coming to an end and fintech is driving it forward

Barclays

 

We hate labels. What makes a bank, a bank, and a fintech a fintech anyway?

Ok, maybe a banking license and significant capital reserves, or a WeWork pod and wearing sneakers in the office, but bear with us…

The portmanteau of fintech has been around for a good while now – as long as Chatsworth has been working this beat. And the lines have been blurring for some time.

Same say the fintech part is just the stuff under the bonnet, or more derisory, the plumbing.

Well guess what. A ride doesn’t get far without its engine. Thus, it is for the global financial system.

And the era of petrol is coming to an end. The fintech’s are levelling up financial services with faster, smarter technology. This is the e-revolution, analogous to the exponential growth in electric cars overtaking their polluting old rivals.

So it’s heartening to see Barclays agreeing with us, that the era of competition between banks and fintechs over as the two collaborate for mutual benefit.

Banks are increasingly becoming technology firms and the fintech’s are delving deeper and closer into traditional financial service provision.

A new report from Barclays concludes that connectivity between the two worlds is the key to a successful future financial services ecosystem.

From our experience with the fintech community, we wholeheartedly agree.

The bank surveyed over 2000 financial services executives in Europe, Asia and the US about the future state of the fintech sector.

More than two thirds reported identify collaborating and partnering with fintechs for mutual benefit as the preferred approach for traditional banks in the future.

Fintechs will partner with the banks and smaller firms will cooperate to integrate their micro-specialisms with more commercially robust players,

What’s driving this? It’s not just pressure on balance sheets to do stuff smarter, faster and better.

It’s the customers and clients and their personal retail experience – tech making their lives easier and better has set expectations.

They have become accustomed to a seamless, digitally enabled life and they want that from their banks, with their work hats on.

JP Morgan is one of those institutions which is absolutely smashing it in smart fintech development and investment. They have hand-picked and nurtured some genuinely brilliant firms and technology offering real solutions to real problems in financial services and beyond.

Back to the Barclays report and some interesting findings on where this is all going to come from in the future.

Interestingly in the payments space, the Barclays report cites China as likely to see the biggest rise in payment innovation over the next five years.

Nearly half of Asian firms and 40% of European firms rank China as the most likely source of future innovation. India comes in the top three as a future source of payment innovation across all three regions.

The US picks itself as the hotspot for future innovation. Our transatlantic cousins have been smashing it for some time but London will have something to say about that.

Let’s look at the facts. UK fintech attracted £37.4 billion of investment in 2019 according to KPMG with the number of deals in the UK reached a six-year high, defying the amount invested globally where overall fintech fundraising fell just short of 2018’s record at USD 135.7bn.

Across Europe, the UK accounted for half of the top 10 deals and netted more than 80 per cent of the continent’s total.

London has the critical mass, the expertise and the professional services hub to hold that crown.

Chatsworth knows a thing or two about fintech. We were the first PR agency to focus on this sector. We’ve been building fintech reputations for 20 years, steering start-ups through launch, growth and onto corporate action, and protecting and enhancing established infrastructures.

We’re fortunate to work with larger institutions and fleet of foot fintech start-ups. In the past there has been friction, with the incumbents clearly under existential threat and feeling it.

Now they are learning to play well together. We’re in the era of collaboration between the banks and fintech’s. This is good news for all.

So can I have my Porsche Taycan now? Ah well, if you don’t ask…

How the UK is still appealing to investors despite Brexit

Fintech Global writes about the thriving Fintech sector in the UK, deciphering why it’s still so attractive to investors despite Brexit, and the measures government are taking to make sure it remains this way.

“FinTech investment in the UK reached a record level in 2019, culminating in a total of $8.4bn being deployed across 341 deals, FinTech Global data shows…Brexit might have concerned investors back in 2016, when funding only reached $1.3bn, but the following year, funding rocketed up to $4.2bn.”

Our CEO, Nick Murray-Leslie, comments on the increased funding for the delivery panel, an initiative designed to identify measures which could support industry growth –  “The aim of this is to further bolster FinTech in the region and ensure it can continue to be a leader in the world. The Brexit process has focused minds on the sheer size and importance of the fintech sector to the city and by proxy the UK economy.”

You can read the full article here.

Investors splash the cash on British fintech startups

Chatsworth was the first PR agency to focus on fintech. We have been building fintech reputations for 20 years, steering start-ups through launch, growth and onto corporate action, and protecting and enhancing established infrastructures.

And our sector is booming. Heartening news this month with reports that global investors poured money into the UK’s fintech sector last year, almost doubling the amount invested here between 2018 and 2019 — despite the rest of the world suffering a slight downturn in funding.

British fintech companies attracted USD 48.5bn (£37.4bn) of investment in 2019, up 91 per cent from USD 25.4bn a year earlier. Data released by KPMG also revealed the number of deals in the UK reached a six-year high, defying the amount invested globally where overall fintech fundraising fell just short of 2018’s record at USD 135.7bn.

Across Europe, the UK accounted for half of the top 10 deals and netted more than 80 per cent of the continent’s record-setting total of USD 58bn.

Read more here.

Chatsworth reflects on International Women’s Day

This Sunday will mark the 109th International Women’s Day, an annual celebration of gender equality across the board, and an important discussion of the work to be done in achieving parity. As a woman working with clients in fintech, I thought I would take this opportunity to share my own thoughts and reflections on the specific challenges and successes in the sector.

Despite the huge progress we have seen since the very first International Women’s Day 109 years ago, the truth is that a fair amount of underlying, residual bias persists. For the finance sector – historically one of the most male-dominated of them all – it is particularly challenging to shift gender stereotypes.

Change is on its way, however. Fintech is the UK’s fastest growing sector and this growth has engendered discussions around the kind of talent we need to feed the industry, in order to remain competitive. We are brilliantly represented globally by Innovate Finance, led by CEO Charlotte Crosswell, who has done a fantastic job with her team to champion women in fintech.

We are now at a place where we recognise that the technology industry as a whole needs a good roster of female talent if we are to remain competitive in a digital world. I am encouraged to see this in the number of discussions, panels, and debates that call on young women to apply for jobs in tech.

From my own experience representing some of the most exciting fintech companies that are out there, I am proud to see that many of my clients have women in senior positions. More than this, many of those women are often in tech roles. R3, the global blockchain firm, has Dr. Katelyn Baker as its Principal Software Engineer. Mosaic Smart Data calls Diane Castelino its Data Science and Research Lead.  LiquidityEdge has Nichola Hunter at its helm. These examples are testament to fintech’s status as a growing sector that is fostering female talent.

On a personal level, I am lucky enough to work for a company that prides itself on gender equality and actively encourages a pipeline of female talent. Chatsworth Communications has a 50:50 gender balance and I am convinced this is absolutely crucial in creating our dynamic, talented workforce.

However, the conversation is far from over. The fact that International Women’s Day is still taking place is a testament to that. Fintech is no exception here. Across the industry, women make up just 29 per cent of the employee base and the inequality is even starker at a leadership level, with men holding 83 per cent of executive roles. Clearly, this needs to change.

The number of UK fintech firms is due to double by 2030, with thousands of new jobs set to be created across design, developing and marketing. If fintech represents the future, we need to make sure that future is equal.

Part of the problem remains the challenge of getting female students into the subjects that feed fintech. But it is changing. More female students are recognising that coding, advanced maths and computer engineering are pathways that are open to them. Today, there are dozens of organisations set up to encourage women to learn how to code. Some of our clients run these, too. There are more opportunities and networks at women’s disposal than ever.

I can’t think of a better way to close than to use a quote from Sheryl Sandberg from her book ‘Lean in’: ‘“In the future, there will be no female leaders. There will just be leaders.”

Until we get to that point, we need to keep talking.

For more information about our culture and job vacancies, check out our careers page: https://www.chatsworthcommunications.com/careers/

 

Written by Catherine Day, Account Manager at Chatsworth Communications.

Blockchain’s five ingredients of interoperability

“There’s also a very special case of cross-blockchain interoperability… the case where the networks at each end of the connection turn out to be running the same platform. Intrachain, if you like.”

Richard Brown is Chief Technology Officer at R3, the enterprise software company supported by hundreds of banks, technology firms, regulators, trade associations and professional services firms. His team builds Corda, the world’s most advanced enterprise blockchain platform. What he doesn’t know about blockchain technology isn’t worth knowing.

Richard has long argued that not all blockchain platforms are alike and that the promise of blockchain technology is real with solutions which can eliminate huge amounts of cost, redundancy, error and needless reconciliation across entire business ecosystems, as well as opening up previously hidden new revenue opportunities.

But not all blockchain platforms are alike: Only some designs will be architecturally suited to the challenge. In his latest thought piece for Forbes, Richard takes his original five ingredients for interoperability and expands them to some real-life, tangible examples including the home buying process.

Read the full article here. As a reminder, here Richard’s five ingredients of blockchain:

  • We need integration with existing systems
  • We need to be able to initiate transactions on other networks
  • We need to be able to transact interchain with solutions on other technologies
  • We need to be able to transact intrachain with solutions on different deployments of the same technology
  • And we need to reduce buyer’s remorse by making it easy to interchange one underlying platform for another

Fintech PR’s original top dog – Chatsworth Communications

Fintech PR

Maybe its something to do with our booming sector, but everyone and their dog is a so-called expert in fintech these days. But is there any bite behind all that bark?

Global into the UK fintech sector doubled last year to USD 48.5bn (£37.4bn) with the number of deals in reaching a six-year high.

Chatsworth was the first communications agency to focus on fintech.

We’ve been building fintech reputations for 20 years, steering start-ups through launch, growth and onto corporate action, and protecting and enhancing established infrastructures.

From global brands like R3, SWIFT, CLS, ICAP and the London Stock Exchange to energetic, game-changing fintech start-ups like Previse, Mosaic and Limeglass, we’ve delivered with our clients.

Looking for intelligent, informed and connected fintech PR which delivers results and value?

Get in touch and let us help build your reputation and tell your story.

Sucden Financial to go live on Cobalt’s FX infrastructure

The post-trade infrastructure provider Cobalt, has today announced that Sucden Financial, is the latest institution to join Cobalt’s post-trade technology network for its substantial FX business.

Cobalt’s post-trade infrastructure creates a single trusted set of standardised trade data from which Sucden Financial can utilise Cobalt’s range of middle and back office trade solutions, including its Core Credit module. Sucden Financial is accessing Cobalt’s broad range of services via IHS Markit’s connectivity service.

Post-trade FX processes are currently siloed and unfit for modern markets. This is highlighted within credit management, where processes can be opaque and create high risk of exposure to credit owners alongside problematic pricing.

Cobalt’s Core Credit solution offers a centralised credit management tool for all relationship types, allowing credit owners to control and manage lines using real-time monitoring tools.

Gavin Parker, COO from Sucden Financial, said: “We continually enhance our services, utilising the latest technology to increase efficiencies for clients. Cobalt provides an exciting cutting-edge solution, enabling us to further expand our institutional FX offering.”

Darren Coote, CEO of Cobalt, commented: “Credit management within FX has long been a problematic area for all market participants. With further adoption of Cobalt’s technology across a variety of market participants, we are working towards centralised infrastructure for the future of FX.”

About Sucden Financial 

A leading international derivatives and FX broker, Sucden Financial provides access to a broad range of markets, including exchange and OTC traded products, including foreign exchange and bullion.

The company was formed in 1973 as the London brokerage arm of Sucden, an independent leader in soft commodities trading. Sucden Financial has since evolved into one of the largest brokers for traders, fabricators, producers, consumers, investment houses, hedge funds, commodity firms and retail brokers.

Sucden Financial has been providing a wide variety of foreign exchange services to corporate and institutional clients for over 30 years. Its financial strength, expertise, established infrastructure and tier one direct banking relationships mean it is well positioned to provide superior FX liquidity and a full spectrum of services.

Contour welcomes Citi into trade finance network

Today Contour has announced that Citi will join its trade finance network, increasing the number of banks that have invested in Contour as part of an industry-wide global collaboration effort. This investment through Citi Ventures will help Contour continue to grow as it develops the open network to create seamless trade and digitize the outdated process.

This announcement comes as Contour moved into full commercialisation of its offering last month after 2 years of successful pilots in 14 countries. Established in Singapore, Contour is now operating as a fully independent entity, welcoming banks and corporates into its beta network.

Contour’s network focuses on improving the Letters of Credit (LoCs) process. Traditionally paper based, Contour digitises LoCs to allow banks and corporates improved efficiency and greater transparency by building connectivity and trust between all parties in the transaction. This is achieved by using R3’s Corda blockchain and a growing partner ecosystem.

Carl Wegner, CEO, Contour said: “Seeing greater collaboration from leading financial institutions shows how important revolutionising the trade finance network is. With international trade being of such significant importance for the global economy, with trillions of dollars’ worth of goods in circulation, proper financing is vital for its continued growth. Our network provides trusted information in real-time, digitising the process for all users. To have a major global trade player such as Citi join us is a huge validation of the work we are doing and allows us to continue creating greater efficiency for the industry.”

Luis Valdich, Managing Director of Citi Ventures said: “The Contour team has a trusted background and is partnering with a strong consortium to help digitize Letters of Credit. Citi Ventures is thrilled to support Contour as it pursues its exciting vision.”

Click here to learn more about our other trade finance based clients.

FXCM PRO announces partnership with Your Bourse

FXCM Group, LLC (‘FXCM Group’ or ‘FXCM’), a leading international provider of online foreign exchange and CFD trading, announced that FXCM Pro, the institutional arm of the business, built a partnership with Your Bourse, a technology company providing liquidity aggregation and risk management platform for MT4/MT5 brokers with hosting in Equinix data centres.

Through the combination of FXCM liquidity and Your Bourse technology, this partnership will allow FXCM clients to access FXCM liquidity through Your Bourse’s Liquidity Hub. With the growing demand for improved low-latency solutions and the drive to reduce costs, this partnership will allow FX and CFD brokers to optimise their processes.

Mario Sanchez, Managing Director & Global Head of FXCM Pro Sales, commented: “Today’s priorities for FX and CFD market participants are focused around cost saving opportunities as well as execution efficiency. Through partnering with Your Bourse, FXCM clients will have one of the latest innovative technologies, able to enjoy greater flexibility while accessing multi-asset liquidity, as well as allowing MT4/MT5 traders to experience a host of low latency solutions at a reduced cost.”

Andrey Vedikhin, Your Bourse CEO, commented on the partnership: “We are excited to add FXCM to our network of liquidity providers and thus allow more brokerages to get access to FXCM multi-asset liquidity at an affordable cost. Clients will also benefit from the low-latency connection with an opportunity to reduce the execution speed even further by utilising a cross-connect between FXCM and Your Bourse infrastructure hubs in Equinix data centres (LD4, LD5, NY4, NY5, CH1, HK1, TY, and FR2).”

Click here to learn more about FXCM Pro.

ACI FMA partners with Axiom Global Advisors

The ACI Financial Markets Association (ACI FMA) has today announced a partnership with Axiom Global Advisors (Axiom) to help Market Participants around the globe implement and adhere to the FX Global Code.

The two partners will collaborate in the delivery of services and tools for Market Participants to embed the principles of the FX Global Code in their daily practices, particularly leveraging their respective education and consultancy offerings. A specific focus will be to raise professional standards in financial markets globally by working together in promoting ethical behaviour and integrity.

ACI FMA and Axiom will also organise events to raise awareness of the Code and offer guidance to support both adoption and implementation.

Kim Winding Larsen, President Delegate of ACI FMA, commented: “Since the inception of the FX Global Code, a priority for ACI FMA has been the further education of market participants on the Code and ensuring its implementation across the market. In fact, our ELAC portal has been recognised by Market Participants as a fundamental tool to assist the objectives of staff ongoing adherence to the Code.

“To support this goal, we are very pleased to be entering into a partnership with Axiom Global Advisors, who share our vision and mission of market wide adoption and education of the FX Global Code.”

Julian Gladwin, Founder of Axiom Global Advisors, said: “We set up Axiom with the mission to help Market Participants understand the FX Global Code and the principles that need to be applied in order to best meet practices, promoting conduct and ethical behaviour. Partnering with ACI FMA will allow us to meet our shared goal of educating the FX industry in the most effective ways of implementing and monitoring the effectiveness of the Code.”

Click here to learn more about our work the ACI FMA.

Q&A session with our interns Isabel, Max and Eleanor

Isabel, Max and Eleanor joined Chatsworth as interns and progressed to take on full time roles with the company. We sat down to talk with them about their journey into Fintech PR.

Tell us your Chatsworth story so far.

Isabel: “After graduating from university, I joined Chatsworth in July 2019 as an intern with a six-month contract. In September I was then offered a permanent contract and came on full time as an Assistant Account Executive. However, 2 weeks ago I was really pleased to be promoted to Account Executive.

“Prior to joining Chatsworth, I had minimal PR and fintech experience. However, seven months in, my confidence and knowledge has hugely increased thanks to the support and training from the rest of the team.

“As my first job after uni, Chatsworth has been a great introduction to the working world where I have been challenged but with constant support. Despite being one of the junior members of the team, I am still given great client exposure and work where I feel like I am making a real contribution to the accounts.”

What is a typical working day like at Chatsworth?  

Eleanor: “I can tell you that no one day is the same. We operate a variety of tasks spread across a number of clients, so we are always kept busy. Even when clients are quiet, we come up with innovative ways for optimum exposure to their key target audience. This could include nominating clients for awards, creating press releases off the back of company announcements or creating ads to promote their products.

“My supervisor keeps me on top of things, helping to prioritise work so I never feel overwhelmed.”

What were your preconceptions of the PR industry before starting at Chatsworth and have these now changed?  

Eleanor: “On the surface, you might assume PR is easy but there is so much that goes on behind the scenes. We have to develop the appropriate strategy and key messaging for clients and communicate this effectively to the right publications.

“The important part is keeping the ball rolling. We’re always on the lookout for opportunities to share client stories, meaning we have to maintain relationships with journalists and the clients themselves. After all, it’s about building a client’s reputation over time.”

How did you find the transition from university to working life?

Max: “Working life is very different from life at university. The hours are longer than those worked by the typical student and commuting is not to everyone’s taste. Despite this, I found my transition entirely painless and, after a few weeks, I didn’t give it a second thought.

“My transition was definitely eased by the way Chatsworth enabled me to grow and learn. Instead of chucking me in at the deep end, I was pushed to progress but never really found myself out of my depth. On the rare occasions I did, there was always someone ready to help.”

What is it like to work within the fintech sector?

Max: “Fintech encompasses such a broad range of businesses, using a diverse set of technology to solve problems I never knew existed; however, you will very quickly get to grips with it.

“The sector sees some of the most interesting developments in the financial world and presents the perpetual challenge of communicating intricate details with both clarity and precision.”

Tell us about the employee culture at Chatsworth?

Isabel: “Being a company with under 20 employees, there is a great sense of teamwork at Chatsworth, where your achievements are always noticed and acknowledged. Regardless of the varying levels of authority, there is no sense of superiority and I feel like I can go to anyone in the team for advice and guidance.

“Outside of work, we are a social team and regularly go to events such as pub quizzes, crazy golf and after work drinks. During work hours, we know when to get our heads down but also when to keep things light-hearted – such as with our office bake-off.”

Find out more about internship opportunities at Chatsworth.

Trade finance distribution poised to grow to $3tn market for investors

“The distribution of trade finance assets to nonbank investors could to grow to a $3 trillion market in the next seven to 10 years, according to Tradeteq Ltd, a digital trade finance exchange.” – S&P Global discuss banks seeing growth opportunities for their trade finance distribution business and collaboration with the Trade Finance Distribution Initiative. Tradeteq’s co-founder and CEO, Christoph Gugelmann, also comments on the growing interest.

Read the article in S&P Global.

Click here to learn more about our work.

Foreign exchange daily turnover in UK reaches record

“Average daily reported UK foreign exchange turnover was a record $2,881bn (€2,671bn) in the survey, a 2% increase from the previous high in April last year and an 11% increase from October 2018.”

Dan Marcus, chief executive of ParFX, and Curtis Pfeiffer, chief business officer at Pragma, both agreed that the results highlight the importance of London to global FX markets and the long-term trend of sustainable growth.

Read what Dan Marcus has to say about FX swaps and non-deliverable forwards and Pfeiffer on spot trading in Markets Media.

Click here to learn more about our work.

How can ‘document atomisation’ bring benefits to research?

Limeglass, the financial research technology company, founded by Rowland Park and Simon Gregory is alleviating businesses of information overload, helping them to navigate through the mass of financial research and gain a comprehensive understanding of the subject to be able to make clear financial decisions.

Read more about Limeglass’ technology in Traders Magazine.

For more information about some of the great work we do for our clients, click here: https://www.chatsworthcommunications.com/work/

Startup spotlight: Cobalt, reengineering the FX market

Darren Coote, CEO of Cobalt, speaks to Fintech Magazine in their startup spotlight series – click here to read the interview.

Contour launches to digitize and modernize trade finance

Today, a new independent global network to digitise and modernise the USD 18 trillion trade finance market has been launched under the new brand – Contour.

The launch follows a series of ground-breaking live pilots in 14 countries and a global trial with more than 50 banks and corporates, which reduced processing times for Letters of Credit by over 90%, from 5-10 days to under 24 hours.

Contour now moves into full commercialisation of its offering and has established itself in Singapore as a fully independent network and is inviting banks and corporates to join its beta network.

The business is backed by: Bangkok Bank, BNP Paribas, CTBC, HSBC, ING Bank, Standard Chartered, SEB, Bain & Company, CryptoBLK and R3.

Contour is built on R3’s Corda blockchain and retains the support and expertise of the R3 team. It is led by Carl Wegner, a trade finance veteran who joins following a successful tenure building R3’s presence across Asia.

The network is focusing initially on Letters of Credit (LoCs), which are issued between banks, typically across country borders. They serve as a guarantee for payments between two companies or entities who want to trade goods or services with each other.

The 400-year-old process for agreeing, issuing and tracking LoCs is largely manual, inefficient and costly. Each party must keep and verifying its own separate paper records, creating duplication and discrepancies.  Contour digitises LoCs on blockchain, helping banks and corporates save time and money by reducing old fashioned, duplicative processes.

While historically recognised as an excellent risk-mitigation mechanism, research by Contour reveals that 86% of participants consider traditional LoCs as over-reliant on paper, takes too long and is becoming ‘intolerable’ for both corporates and banks.

Carl Wegner, CEO, Contour said: “The opportunity cost in trade finance is huge. Trillions of dollars in commodities, products and services are transacted daily, but the sector is still characterised by slow, duplicative and expensive processes. Contour delivers a network where trusted information is shared in real-time, effectively digitising Letters of Credit across all users in the transaction.

“We are indebted to the community of banks and corporates who have collaborated with us to validate our solution which delivers genuine, measurable value as well as process improvement around Letters of Credit. With the launch, Contour is now available to provide a full commercial service to organisations looking to enhance their trade finance practices.

“We are now focusing on scaling the network with more banks, corporates and partners, and look forward to continuing to collaborate with our growing community.”

Click here to learn more about our blockchain-based clients.

David E. Rutter on CNBC’s Squawk Box

Great to see David E. Rutter, founder and CEO of R3, on CNBC’s Squawk Box this week, discussing his predictions for blockchain in 2020 and beyond.

Click here to watch the interview

For more information about some of the great work we do for our clients, click here: https://www.chatsworthcommunications.com/work/

Tradeteq and Pragma win American Financial Technology Awards

We’re delighted that two of our clients, Tradeteq and Pragma, have been recognised in this year’s American Financial Technology Awards, run by Waters Technology.

Tradeteq, the electronic trading platform for institutional trade finance, picked up the award for the ‘Best Collaboration Initiative’. The accolade recognises their efforts to work with over 20 banks, financial institutions and trade associations to close the $1.5tn trade finance gap through the Trade Finance Distribution Initiative (TFD Initiative), for which it is the distribution technology provider.

Additionally, Pragma has won the ‘Best Front-Office Initiative’ accolade for its innovative multi-asset, broker-neutral algorithmic execution platform, Pragma360. The platform enables front-office professionals to create a unique algorithmic trading suite under their own corporate brand.

Christoph Gugelmann, CEO of Tradeteq, commented: “Winning this award recognises the transformative change Tradeteq is bringing to the trade finance market. By partnering with some of the leading trade finance banks, we hope to transform this market into one that is operationally efficient, scalable and easily distributable. Through the use of our credit scoring AI and electronic trading platform, the TFD Initiative’s members can boost trade finance distribution and contribute to closing the trade finance gap.”

David Mechner, CEO of Pragma, was extremely pleased to win the award, stating: “In recent years, the front-office has focused on regulators’ calls for more transparency around execution quality and market impact. Winning this award is recognition of Pragma’s efforts to help front office professionals respond to this mandate using the most-advanced trading and execution tools.”

For more information about some of the great work we do for our clients, click here: https://www.chatsworthcommunications.com/work/

Tradition brokers AUD/USD swap trade using LCH SwapAgent

Tradition, one of the world’s largest interdealer brokers in over-the-counter commodity and financial products, has facilitated the first, brokered AUD/USD cross-currency swap trade using LCH SwapAgent.

The AUD/USD trade was executed between Mitsubishi UFJ Financial Group (MUFG) and another counterparty on 20 November 2019. Tradition’s global presence, market knowledge and connectivity ensured it was the ideal partner to facilitate this trade.

SwapAgent is a service designed to simplify the processing, margining and settlement of non-cleared derivatives. It benefits from LCH’s expertise in serving and managing risk for the cleared Rates and FX derivatives market.

Nathan Ondyak, Global Head of LCH SwapAgent, comments: “Since launching in 2017, customers trading non-cleared derivatives have utilised SwapAgent to gain many of the efficiencies that they have become accustomed to in the cleared market. We are delighted to welcome MUFG as one of our newest members to the service. The completion of the first brokered AUD/USD trade between bilateral counterparties using SwapAgent is an important milestone for participants trading cross-currency swaps.”

Amit Kantaria, Director in the Rates Trading Group at MUFG, EMEA, added: “MUFG is pleased to have been able to participate in the first brokered AUD/USD cross currency swap through SwapAgent. We believe that this is the first step towards an exciting future, and look forward to this evolution of the uncleared derivatives market.”

Mike Hayter, Manager of the cross-currencies broking desk at Tradition, comments: “Tradition is delighted to facilitate the first, brokered bilateral AUD/USD swap trade using LCH SwapAgent. This is a crucial service that improves standardisation, introduces efficiency and reduces operational and credit risk counterparties in the non-cleared derivatives market.”

Limeglass announces new investment from J.P. Morgan

Limeglass, the financial research innovation company, today announced that J.P. Morgan has invested in the company. Limeglass’s technology automatically analyses the paragraphs in research documents in real-time, taking into account the underlining context and structure. The Limeglass ‘Research Atomisation’ solution uses proprietary rich Natural Language Processing (NLP), AI, machine learning and their comprehensive cross-asset and macro taxonomy to smart-tag each paragraph in context.

Limeglass recently completed J.P. Morgan’s In-Residence Program, which incubates emerging technology companies to develop production-ready solutions solving for critical wholesale banking problems. Limeglass’s technology enables banks to personalise their research product for both internal and external audiences, maximising the value for users and ensuring that the correct research reaches the correct audiences.

Rowland Park, Chief Executive Officer and co-founder of Limeglass, said: “The volume of financial research, and the lack of innovation in how it is delivered, mean that market participants can spend hours searching through their email to find information on the trades they are considering. It is all too easy to miss vital information buried deep in large documents, wasting time and valuable research insights. Limeglass cuts through the noise, providing users with only the relevant paragraphs in their financial research with a simple search.”

Hussein Malik, Head of Transformation & Implementation across Sales & Research at J.P. Morgan, said: “The insights our Research teams produce daily are a huge source of value to our clients. We are continuously investing in technology to help deliver industry-leading content and to help us and our clients further mine that value.”

Simon Gregory, Chief Technology Officer and co-founder of Limeglass, said: “Having worked in research for all my life, I was always surprised at how much research was being missed by users.  We looked at the research consumption and distribution workflows from first principles and realised that the document centric approach was limiting access to the content.  Using cutting edge technology to analyse the unstructured data in research documents, we’ve created a whole new way for market participants to engage with financial research.”

Wematch strengthens team with Chairman

Wematch, the global multi-asset-class, web-based matching and negotiation platform, has appointed Jack Jeffery as Chairman of its Board.

With more than 35 years’ experience in financial markets, Jack was previously CEO at electronic fixed income platform MTS and also at EBS, the spot FX electronic broking platform. Jack served 11 years at Citigroup, where he was Global Head of FX options.

Jack has previously served on the Bank of England and US Federal Reserve Foreign Exchange committees and hisappointment follows Wematch’s recent funding round, which saw banking titans J.P. Morgan and Société Générale – both users of Wematch – invest in the fintech. There are now 40 banks and more than 750 traders using Wematch’s platform, with more currently onboarding.

Wematch provides technology to transform how traders match, negotiate and manage trades. This brings the audit and control benefits of electronic tools to trading, delivered as web-based software-as-a-service technology. This significantly cuts costs and, enhances the orderly execution of processes for traders, enabling seamless settlement.

Despite the growth and benefits of e-trading, in some markets institutional investors still conduct most of this activity over the phone, or through interdealer brokers. It is estimated that more than 80% of structured products and 80% of FX derivatives are still transacted by voice. To put it into context, the interest rate swaps market is worth $2.1 trillion a day, with more than 70% of that business handled by phone negotiation.

Jack Jeffery, Chairman of Wematch, said: “The Wematch platform represents an extraordinarily significant step forward in the world of inter-bank trading. Its proprietary architecture enables enhanced efficiencies, providing enormous cost benefits as well as improving regulatory compliance. As a neutral platform that is constantly developing to the markets’ needs, Wematch is reshaping the trading market. It is the right product at the right time.

“Having built my career bringing electronic innovation to the capital markets, I am thrilled to be part of a team that is leading such a profound transformation in the market.”

Joseph Seroussi, co-CEO of Wematch, said: “The voice market remains robust and an integral part of the trading process – its continued usage is a demonstration of its fundamental importance to participants’ business. But it is time that traders have the best technological tools to facilitate optimal trading with confidence. Jack Jeffery’s experience will be invaluable to Wematch as we work to bring the benefits of electronic trading’s auditing and transparency to traders across capital markets.”

Gregory Mimoun, co-CEO of Wematch, said: “Jack has an impeccable track record of steering technical innovation across multiple asset classes which have benefited those markets enormously.

“His appointment is a significant vote of confidence in our technology and our business. We are delighted to welcome him to Wematch as we move to the next exciting chapter in our vision to transform trading markets.”

CordaCon 2019 – London event is packed out

  • R3 momentum increases as ecosystem swells to over 350 firms
  • Annual conference attracts over 1,100 attendees
  • CEO predicts traditional business models and technology must change or face extinction

Traditional business models remain under threat across the full value chain as enterprise blockchain continues to gain momentum, according to R3 CEO & Founder, David E Rutter

His comments came during R3’s annual CordaCon event, attended by over 1,100 developers, business leaders and industry experts in the heart of London’s financial district. The event drew a significant increase on previous years.

Since inception four years ago, R3 has risen to become a key player in blockchain-inspired technology to enhance a range of business processes including trade finance, insurance and financial services. R3’s global blockchain ecosystem has now grown to over 350 companies.

Among the announcements at CordaCon included a strategic partnership with Accenture and SAP, for R3’s Corda platform to enable two of the tech industry’s major players to provide a real-time gross settlement token-based exchange, with instantaneous settlements to reduce friction throughout the transaction chain.

Mr Rutter added: “Traditional business models are under threat across the full value chain. We will see the continued convergence of traditional Financial Market Infrastructure and broker businesses such as SIX, NY Stock Exchange, and Nasdaq with the crypto exchange world, such as Coinbase and Binance. We’ll also see new players emerge and the nimblest will win.”

Many of R3’s early adopters were at the event to talk about the work they are doing on Corda—such as TradeIX with Marco Polo, CryptoBLK with project Voltron, The Institutes Risk Alliance, SDX, B3i and ABI Lab to name a few.

Mr Rutter is a financial services veteran, having served as CEO of ICAP’s electronic broking division, before forming R3 and US treasuries platform LiquidityEdge, in the process of being acquired by MarketAxess in a USD 150 million deal

Mr Rutter added: “Corda’s longer term product strategy includes delivering capability on settlement and value transfer because we fundamentally believe we are embarking upon the beginning of a ‘tokenization of everything’ era. Digital Assets or tokens will reimagine how value is moved and managed and will fundamentally change the nature of business.

“Security tokens are squarely now under the purview of the regulators and will fall under global securities regulation. I believe long-term success and sustainability of tokens must rely on compliance with key principles pushed by the maturing regulatory framework. We will need a strong, well balanced ecosystem, regulatory framework, innovative mindset, and know-how from existing market infrastructure, as well as the right enterprise technology.

“We expect to see further enterprise blockchain consolidation. A year or two ago there were dozens maybe more platforms aspiring to be enterprise blockchains and we are already down to two real contenders in Corda and Fabric, with many other still trying to make Ethereum work at scale with proper privacy protections.

“On Interoperability, as applications go into production the need for seamless interoperability becomes more evident, so the surviving platforms need a rock solid interoperability story. I believe what we call “business network operators” the solution providers and of course their customers know that there won’t be just one solution for say Trade Finance so being able to send obligations to other customers on other BNO becomes an absolute necessity.

“The second order of this would be interoperability between blockchains and I think I was first asked about this over four years ago and the story for me is the same. While I think that may be important over a longer time frame it’s not a next year crucial deliverable.  And for us anyway we are just looking to further solidify our interoperability story and I am pleased we have been focused on this for some time now.”

FXCM launches basket of five cryptos for retail investors

Foreign exchange trading platform FXCM Group has launched a basket of five cryptocurrencies aimed at retail investors.

Dubbed CryptoMajor, the basket product includes bitcoin (BTC), XRP, litecoin (LTC), bitcoin cash (BCH) and ethereum (ETH), which are equally weighted to protect against market volatility, the firm said in an announcement Monday. The five cryptos are already traded on its platform.

Speaking on launch, CEO Brendan Callan said the product simplifies crypto investment for retail users:

“Trading a basket of cryptocurrencies means our users are freed from the hassle of constantly monitoring the markets. CryptoMajor therefore streamlines the trading process and protects our customers from unanticipated and adverse market movements.”

The product is targeted at customers seeking to enter the nascent crypto market, Callan said, but who “don’t want to risk too much overexposure.”

Under its previous owner, Global Brokerage, Inc, FXCM notably lost its license with the Commodity Futures Trading Commission, in addition to receiving a $7 million fine, for trading against its own customers in 2017, according to the Financial Times.

After two of the company’s founders were banned from the U.S. financial industry, the London-based company exited the U.S. market. It’s now majority owned by Leucadia Investments, part of the Jefferies Financial Group, according to the FXCM website.

LiquidityEdge licenses Mosaic MSX analytics platform

Liquidity Edge, the electronic US Treasuries trading venue, has signed a deal to license Mosaic Smart Data MSX platform to provide venue analytics across its portfolio of marketplaces.

Mosaic Smart Data will give LiquidityEdge a package of analytics that will help the latter to monitor and compare liquidity in the markets to ensure smooth market operation, better trading efficiency and growth facilitation.

These additional analytics will help in comprehending the transaction flow and behaviour of market participants and calculation of market impact, as well as transaction costs. The MSX platform has anomaly detection tools that are built on machine learning tools, that will point to any abnormal market activity that may trigger a rising issue. So, once such an action is detected, preventive measures will be taken to maintain normal market operations.

Market liquidity in fixed income decreases and this creates an obstacle for trading venues to acknowledge possible challenges in their platforms in advance and fix the issues, so solution to fix this problem are constantly sought after.

The deal between LiquidityEdge and Mosaic Smart Data is the result of long collaboration between the two to develop analytic tools for trading operations. The service will be first used by LiquidityEdge on the back-end to get insights on the performance of the trading venue, and afterwards – for insights for market participants.

LiquidityEdge will serve as a SaaS feature with the MSX platform fully managed by Mosaic Smart Data.

This is what the CEO of LiquidityEdge, Mr. Nichola Hunter said:

“We built LiquidityEdge to challenge existing market structures and ‘business as usual’ in the Treasuries market. So, we’re always on the lookout for innovation which will enable us to deliver a better experience to our users. The MSX platform harnesses the power of our order book to deliver finely grained analysis and actionable insights delivering performance improvements for LiquidityEdge and our users.”

FX post-trade network Cobalt goes live

JP Morgan and SocGen invest in Wematch

JP Morgan and Societe Generale have invested in fintech firm, Wematch, as the company advances its plans to transform traditionally voice-traded financial markets.

Wematch provides technology which augments how traders at banks match, negotiate and manage trades. This brings the audit and control benefits of electronic tools to voice trading, delivered as web-based software-as-a-service technology.

There are now 40 banks and more than 750 traders on Wematch cross assets with more onboarding and billions of dollars in deal flows matched using its technology.

Despite the growth and benefits of e-trading, in some markets institutional investors still conduct most of their trading over the phone, or through interdealer brokers.

Wematch delivers the benefits of the newest web technologies to traders at banks, improving the matching and negotiation process, cutting costs for banks and increasing efficiency and reducing conduct risk for traders.

Wematch came through J.P. Morgan’s In-Residence Programme and Societe Generale’s Global Markets Incubator to foster the expansion of the fintech’s offer across asset classes and instruments.

The funding takes J.P. Morgan’s and Societe Generale’s relationship with Wematch from users to investors, with the banks already active on Wematch across all existing platforms.

There is enormous potential for Wematch to help the capital market industry in further adopting digital solutions across multiple markets globally, and to adapt this awarded technology to internal and client-facing solutions.

Despite pressure from regulators for more trades to be conducted on electronic trading venues, it is estimated that over 80% of structured products and FX derivatives are still transacted by voice.

The interest rate swaps market is worth USD 2.1 trillion a day, according to the Bank for International Settlements, with over 70% of that business handled by phone negotiation.

Gregory Mimoun, co-CEO of Wematch, said: “Wematch is delivering the next generation in trading protocols, with intuitive GUIs and workflow tools to give voice trading professionals the edge. Everything we build is designed to support the trader’s decision, giving them the tools to make the right call with confidence and certainty.”

Joseph Seroussi, co-CEO of Wematch, said: “Wematch is leveraging on the latest available technologies and the traders’ community permanent feedbacks and inputs to develop its capital market solutions. Our objective is to have a significant impact on the bottom line expenses of Financial Institutions by rolling out the Wematch technology on all markets, internal, or dealer-to-client activities.”

Pasquale Cataldi, Head of Markets Lab, J.P. Morgan, said: “J.P. Morgan was an early supporter of WeMatch. As a member of our InResidence Programme, the platform showed real potential to transform the interbank interest rate dealing market through automation, resulting in audit and control benefits. The level of market adoption has already been encouraging and we’re delighted to continue the journey with them.”

Albert Loo, Deputy Head of Sales for Global Markets at Societe Generale, said: “Societe Generale is excited to contribute to the Wematch development after a successful collaboration within our Global Markets Incubator. Innovation in trading technology will drive efficiencies for market participants and we strongly believe that Wematch can sustainably improve dealing processes across asset classes.”

Wematch launched its interest rates offering in June, with 10 banks matching and negotiating Euro IRS curves, butterflies, basis and gadgets structures, with single stock & Index options to follow in the coming months.

This was built on existing Wematch services for securities lending and equity derivatives and the firm now plans to build out services to more asset classes and instruments.

Mastercard partners with blockchain firm R3

Payments giant Mastercard is to develop a blockchain-powered cross-border payments platform in partnership with enterprise-focused blockchain firm R3.

In an announcement on Wednesday, Mastercard said the two firms have inked a deal to “develop and pilot” the payments solution. It will initially be aimed at connecting faster payments schemes and banks backed by Mastercard’s clearing and settlement network.

The platform will be built on Corda Enterprise, the commercial version of the platform, as opposed to the open-source Corda Network, R3 told CoinDesk.

The partnership is planned to merge R3’s expertise at developing blockchain solutions with Mastercard’s existing payment systems and network. Ultimately, the firms hope the new platform will help tackle industry issues such as costly payments processing, liquidity management and a paucity of standardization and connectivity between banks and domestic clearing systems.

R3 CEO David E. Rutter said:

“All institutions – large or small – rely on the ability to send and receive payments, but all too often the technology they rely upon is cumbersome and expensive. Cross-border payments can be a particular pain point. Corda was designed specifically for enterprise use cases such as this, and we look forward supporting Mastercard in bringing blockchain-enabled payments businesses across the globe.”

Citing its July acquisition of international payments firm Transfast as a boost to its network, Mastercard said the deal to utilize Corda Enterprise will further expand its capabilities in the payments arena.

The news of the partnership also comes just days after Mastercard joined the Marco Polo trade finance blockchain network founded by R3 and TradeIX.

Peter Klein, executive vice president of new payment platforms at Mastercard, said in the announcement:

“Developing a new and better cross-border B2B payments solution by improving worldwide connectivity in the account-to-account space is central to Mastercard’s ambition. Our goal is to deliver global payment infrastructure choice and connectivity as demonstrated through our recent strategic acquisitions and partnerships, including our relationship with R3.”

FX operations and credit: hampering liquidity, raising costs

The FX market currently looks like the ultimate mismatch. Front office processes have been transformed to accommodate the realities of electronic trading – operations and credit haven’t. This is acting as a drag on FX liquidity, as well as imposing an enormous cost burden: ~£20bn per year for the top global investment banks and buy-side institutions. Fortunately, as Anoushka Rayner, Global Head of Sales and Business Development at Cobalt explains, there is a simple and readily achievable remedy: centralised standardisation.

The FX market has a proven track record for acting on its own initiative to ensure that trading is always orderly and unnecessary risks are curtailed, with the creation of CLS an obvious example. There is now a pressing need for it to act in similar fashion to address the issues of post-trade processing and credit management.

Operational Drag

The FX front office has evolved to accommodate the shift from a voice brokered market – resulting in transparency, efficiency, liquidity and consistency – by bringing counterparties together so they can interact more effectively. In doing so, all participants have benefited from lower frictional costs and greater transparency.

Sadly, the same cannot be said of FX post-trade processing, which still uses much of the same basic infrastructure it used to support voice broking. In two decades, it has remained essentially unchanged, resulting in legacy processes/practices that are wholly unsuited to supporting electronic trading as conducted in today’s FX front offices. These processes/practices are also excessively costly, to the extent that post-trade costs can now even exceed the potential profit from the execution of a trade.

At the core of the problem are the fragmentation, replication and complexity of internal processes. This is hardly surprising given that at least 23 services are usually involved in managing current FX post-trade activities, which inflates both costs and operational risks. Multiple vendors are needed, as are multiple copies of the same trade (20+ is not untypical). At the same time, existing legacy processing technology cannot keep up with market evolution and so requires additional outlay to pay for the manual processes needed to cover its shortcomings.

In some cases, extremely costly processes persist. These could be dispensed with altogether in a more efficient processing environment. A case in point are confirmations, the costs of which at some top tier FX banks – just for their EB and PB businesses alone – run to nearly USD5mn per year.

Attempts to respond to changes in the front office by changing post-trade methods have also made the situation worse, as new substandard processes are layered on top of an already fragile and inefficient process stack. Each new process added therefore effectively exacerbates an already suboptimal process flow, in terms of both cost and risk.

These issues apply across all FX-related instruments, which when one considers that volume in uncleared FX derivatives (a market approximately twice the size of spot) totaled ~USD88trn at 2018-year end, illustrates the sheer magnitude of the problem. In fact, for FX derivatives, the risks and costs of these operational limitations are even more acute, as the processes involved are more complex than for spot.

These issues are collectively hampering the FX market’s overall efficiency and growth. This applies across bank to client, bank to bank and prime brokerage segments. In some cases, it is already causing market distortion, such as driving participants to review their position in FX prime brokerage. Given the FX market’s established reputation for resolving structural issues of this nature, it should be possible to find a solution internally, rather than directly involving external bodies, such as regulators.

Credit

A related area that is also creating unnecessary cost and risk – as well as damping liquidity growth – is credit management. Given the large trading volumes now conducted via API and at high frequency, FX is probably the market least tolerant of latency. Yet despite this, antiquated and fragmented credit management processes still persist, causing significant practical problems. Workaround remedies have emerged in an attempt to address these but create different problems instead. Credit kill switches are a case in point, because they can create disputes when clients find themselves having to reduce positions at unfavourable prices and also requiring a manual unwinding process, exposing both clients and banks to further issues.

Credit-related risks, such as over-commitment, still remain stubbornly high, while workaround remedies actually reduce credit efficiency, such as over-allocating to accommodate localised management of credit within venues. Costs are also an issue in credit management, with top tier banks spending considerable amounts unnecessarily on redundant/inefficient credit processes and technology.

The Remedy

The good news is that a solution is already entirely achievable at technical level. The obvious remedy is a single centralised shared ledger platform using standardised data that can handle all the necessary post-trade activities (plus credit) in one solution. It would mean that compliance with many of the principles in the GFXC’s FX Global Code of Conduct could become an achievable and immediate reality rather than merely being aspirational. A case in point is the principle relating to real time monitoring of trading permissions and credit provision

A centralised industry shared ledger platform would deliver multiple practical benefits across the market place. The most obvious would be to eliminate duplication and cost saving. Instead of running multiple versions of inadequate processes, participants could handle trades using a single set of consistent industry-standard processes. In the long term this could deliver cost savings of up to 80%, with ~50% possible in the medium term.

An additional benefit is cost transparency. In the current environment, with the accumulation of multiple layers of legacy operations and credit technology/processes, it is often extremely difficult to determine the post-trade cost of a transaction. A central standardised process would by contrast make the measurement and monitoring of post-trade costs straightforward and potentially deliver the same degree of transparency as already available for FX execution costs.

This shared ledger approach would also deliver various credit management benefits. For instance, the availability of near real time credit data would enable more efficient credit processes, such as:

  • Preventing erroneous credit cut-offs (thus improving client relations)
  • Making more efficient use of available lines
  • Avoiding over-commitment risks
  • Alleviating balance sheet pressure

Centralising credit management using a shared ledger enables more dynamic control across all types of trading relationship (bilateral, tri party and quadri party). This will dispense with the need for over-allocation and rebalancing in order to accommodate localised management of credit within venues. Those issuing credit will also be taking control of it (as is the case in equity markets) and will therefore be able to recycle it back into the market in the most efficient manner (a key consideration for non-CLS currencies and non-CLS members). Ultimately this will result in venues receiving business because they offer the best price, not because there is residual credit left at them.

In operational terms, workloads will also reduce when using this sort of solution, as less remediation will be required. Efficient credit management and automated processing will drive a reduction in failed trades, thereby also reducing the need for manual intervention and repair.

Liquidity and Regulation

The cost and efficiency benefits delivered by a centralised industry shared ledger platform have important implications for liquidity and market participation. Trading volumes in G7 pairs have been declining in recent years for a variety of reasons, but operational/credit inefficiencies are clearly playing some part if they are cutting trade margins to near zero.

If individual ticket processing costs decline significantly, then logically this will boost existing participants’ willingness to trade, both in general, but also potentially in smaller transaction sizes. By the same token, new participants may be encouraged to join the market once they can see that the processing cost burden and operational risks have been alleviated.

Finally, there are also prospective regulatory advantages to the FX market adopting a centralised shared ledger solution. Some regulators are already clearly aware of the issues, as shown by the FCA and BoE’s convening of a ‘Technology Working Group’ to reform post-trade processing so as to reduce complexity, encourage innovation, and improve systemic resilience. A shared ledger platform could support this initiative in various ways, but one of the most obvious is with regulatory filings.

At present, participants (often using manually intensive processes) incur substantial costs collecting trade data and submitting it to regulators. Market-wide adoption of a shared ledger solution would instead make it possible for participants to submit regulatory filings far more easily, plus do so in a consistent format. This would enable better monitoring of any potential systemic risks, plus delivering lower regulatory costs for all concerned (including regulators). Central banks could send a strong message here by adopting a shared ledger solution for their own trading activities, which would also serve as a clear signal to the organisations they regulate.

Conclusion

Adopting a single centralised utility for FX post-trade functions based on a common data standard ticks numerous boxes for all market participants. These include considerable cost savings, reduced credit/operational risks and better use of balance sheet, which in turn also facilitate greater trading activity and more diverse participation, as well as enhanced price discovery and lower regulatory overheads. Finally, it will also reinforce the FX industry’s existing reputation for innovating in the common interests of all market participants.

Five more banks and financial institutions join the Trade Finance Distribution Initiative

Commonwealth Bank of Australia (CBA), ABN Amro, London Forfaiting Company, Crown Agents Bank and Natixis have joined the Trade Finance Distribution Initiative (TFD Initiative).

They join ANZ, Crédit Agricole CIB, Deutsche Bank, HSBC, ING, Lloyds Bank, Rabobank, Standard Bank, Standard Chartered Bank, and Sumitomo Mitsui Banking Corporation as members.

The TFD Initiative is an industry-wide drive to use technology and standardisation for the wider distribution of trade finance assets. Since launching earlier this year, a growing number of banks, institutional investors, trade associations and trade finance service providers have joined as members.

Trade finance presents a compelling multi-trillion dollar investment opportunity for institutional investors seeking sources of long-term, low-risk returns based on the tangible flows of goods and services. However, there is no scalable market infrastructure in existence to facilitate the exchange of trade finance assets between banks and institutional investors.

This has led to the creation of the TFD Initiative. Its members will work together to utilise and adopt a common infrastructure powered by Tradeteq, the global trade finance distribution platform. Tradeteq’s technology allows banks and institutional investors to efficiently connect, interact and transact. It uses machine learning technology for supply chain predictive analysis, transaction level credit scoring, risk management, reporting and portfolio composition.

Anne-Cécile Delas, Global Head of Trade & Treasury Solutions at Natixis, said: “The distribution of our trade finance assets is key to better serving our clients. Networks like the TFD initiative, gathering banking, regulatory and buy-side sectors, will help to make trade finance assets more accessible to a wider range of investors, in a standard and processed way.”

Sylvain Labattu, Executive Director in Global Commodities & Trade team at CBA, said: “We view the TFD Initiative as a crucial process in the opening up of risk distribution in the trade finance asset class. Staying at the forefront of industry-wide technological and process developments enables us to better connect with and serve both our domestic and global corporate client base through excellence in structuring and distribution, access to data and analytics, and best in class corporate digital offering.

Simon Lay, CEO at London Forfaiting Company, said: “We are pleased to become a member of the TFD Initiative and help shape the use of enhanced technology in our industry. The interest in this forum signals that there is growing interest to establish trade finance as a liquid and scalable asset class to a new investor pool. We all stand to gain by increasing collaboration, leveraging new technologies and adopting standardised processes in the trade finance space.”

Robert Pothoven, Associate Director at ABN Amro, said: “We look forward to collaborating with other members of the TFD Initiative and believe bringing the industry together offers a great opportunity to drive forward adoption of more efficient technology throughout the trade finance market.”

Duarte Pedreira, Head of Trade Finance at Crown Agents Bank, said: “The TFD Initiative has the potential to reshape the trade finance market. By opening up the asset class and making it more accessible outside of the traditional banking world, the TFD Initiative is, in essence, creating a fairer playing field, where non-bank investors can also benefit from the excellent risk/reward opportunities presented by trade finance assets. Crown Agents Bank is proud to work alongside our peers to optimise the benefits of trade finance to our clients.”

André Casterman, Board Member at Tradeteq and Chair of the Fintech Committee at the International Trade and Forfaiting Association, adds: “We are pleased to welcome our latest members. The existing trade finance infrastructure that institutions rely on is outdated, and the industry is on the cusp of change. This is a truly international, collaborative effort that includes the banking community, institutional investors, trade associations and other service providers.

“Our members have told us how the benefits of greater trade finance distribution will be felt along the entire trade finance supply chain, from issuers providing letters of credit right through to corporations seeking cross-border funding. By working together, we are one step closer to achieving our objectives.”

Renowned Professor, Rama Cont, joins Mosaic Smart Data as Scientific Advisor

Mosaic Smart Data (Mosaic), the real-time capital markets data analytics company, has appointed Oxford University Professor of Mathematical Finance, Rama Cont, as Scientific Advisor.

Professor Cont’s role will be to help Mosaic Smart Data utilise the latest academic quantitative finance research in the development of its machine learning, artificial intelligence and data analytics capabilities. Professor Cont will work directly with Mosaic Smart Data’s data science team to make the latest in data science technology available to Mosaic’s customers, as well as guiding Mosaic’s R&D activities.

In addition, he will contribute to Mosaic’s quant talent recruitment and develop links with the broader research community.

Professor Cont was appointed Professor of Mathematical Finance at St Hugh’s College Oxford in 2018. Previously, he held the Chair of Mathematical Finance at Imperial College London and has 20 years of experience working with the financial markets.

Rama Cont said: “What intrigued me most about working with Mosaic Smart Data was the opportunity to take the theoretical work we are doing on the academic side and demonstrate its practical application in the cut and thrust of the capital markets. Mosaic Smart Data’s customer base, with some of the world’s top financial institutions, provides an unparalleled opportunity to apply this academic research for the best of the best.

“By bringing together Mosaic’s team of highly experienced data scientists with our own world-class researchers, we have an incredible opportunity to bring the most advanced data science ideas to real-world applications. This will strengthen both the Mosaic platform and academic research efforts.”

Matthew Hodgson, CEO and founder of Mosaic Smart Data, said: “The firms that succeed in tomorrow’s markets will be those which can harness their data most effectively, extracting the most useful insights in real-time to drive productivity and performance. Our mission is to provide the tools to make that happen.

“We’ve been working with the scientific community since our beginnings and in 2018, Mosaic became the first fintech to collaborate with the European Space Agency. By working with Rama, we will have direct access to the most promising research being developed at the world’s top institutions to ensure that Mosaic Smart Data’s analytics is always at the leading edge of what’s possible in the capital markets.