Cobalt Launches Blockchain-Based FX Infrastructure
Cobalt, a blockchain-oriented startup, launched a foreign exchange infrastructure that is now used by Deutsche Bank, Saxo Bank, and XTX Markets. The post-trade infrastructure developed by Cobalt reduces errors, costs, and speeds up trading processes.
20 Financial Institutions Involved
Cobalt has worked with 20 financial institutions, including banks and forex brokers, to build a system that would replace the current solutions that come with higher volumes but smaller ticket sizes. For those unfamiliar, the trading ticket represents a record with all the conditions, terms, and basic information of a trade.
Some of the 20 companies involved in Cobalt’s trials are already using the system, including Deutsche Bank, Saxo Bank, and XTX Markets.
Today, post-trade service providers, especially brokers and banks, often rely on manual processes and dated legacy technology. Thus, a single trade now operates several records for all involved parties, leaving room for inconsistencies throughout lifecycle events.
To reduce potential errors, Cobalt’s system uses an automated technology that matches all versions of a forex trade into a so-called “trusted copy.” By doing this, the system generates a single immutable data set of forex transactions instead of relying on multiple and fragmented records.
Russell LaScala, co-head of Deutsche Bank’s Global FX division, commented:
The two biggest business issues banks face today are managing risk and the scaling of their business with the rise of smaller tickets. Cobalt’s solution ensures we can reduce operational risks associated with legacy systems and slash the cost of processing tickets for our entire FX business using a single platform.
Cobalt’s Solution Will Reduce Costs
Cobalt’s blockchain-based system has been able to provide customers with more than 50% in cost savings across the forex lifecycle.
Mike Irwin, COO at XTX Markets, explained:
As an institution with daily trading volumes of $150 billion, it’s vital we use the best technology to maximise efficiency and reduce costs. We have partnered with Cobalt as it is a neutral, independent market facilitator that offers the functionality and sophisticated technology we require to scale our business.
Elsewhere, Dave Reid, global head of FX Prime Broking at Deutsche Bank, said that Cobalt’s netting and aggregation service enabled the German bank to efficiently handle its bilateral and triparty transactions and minimise risk exposure and excess ticket processing.
Henrik Villberg, global head of Saxo’s Trading & Market Access division said that the broker usually incurs significant costs from back-office processes, given that Saxo deals with high volumes of small-ticket FX trades. Cobalt’s solution addresses this issue by leveraging the distributed ledger technology (DLT).
Cobalt CEO Darren Coote expressed his confidence that shared infrastructure was the future of post-trade forex.
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