Cobalt DL says that it
has commenced beta testing with a number of leading FX participants on its
private peer-to-peer network that uses distributed ledger technology in order to
try and reduce post-trade cost and risk.
Andy Coyne, co-founder
of Cobalt DL, stresses to Profit &
Loss that the initial innovation that his firm will be providing consists of
providing a “golden” ledger of transactions between financial services firms.
“People talk a lot
about blockchain, but what we’re really talking about is a shared ledger of
information between financial institutions,” he says.
From a single
transaction, existing post-trade infrastructure creates multiple trade records
for buyer, seller, broker, clearer and third parties, according to Cobalt.
The firm thus argues
that by creating a single, shared view of a transaction, firms are able to free
up their back and middle office resources that are currently overwhelmed by the
need for continuous reconciliation across multiple systems.
Coyne says that the DL technology his firm has
designed is able to integrate seamlessly with all necessary trading sources and
venues, providing immediate efficiency benefits, which analysis has shown to
deliver a significant cost reduction when compared with existing
After a year of design
and testing and following the successful completion of a proof-of-concept with
one of the largest FX market making banks, Cobalt says that its new platform
will launch in 2017, with eight leading institutional FX participants already
committed to the service.
First Derivatives (FD) has
invested and partnered with Cobalt, providing services to further develop
it and will license FD’s Kx technology, a big data
solution, as a core part of its platform.
“The emergence of agile,
sophisticated technology such as distributed ledgers has set the scene for an
alternative to the inflexible post-trade infrastructure that financial market
participants are forced to use today,” says Coyne. “Cobalt DL’s combination of
market expertise and forward-thinking technology is dramatically shaking up the
post-trade space and significantly reducing costs for market participants.”