Vanguard, in collaboration with technology provider Symbiont, and in conjunction with Bank of New York Mellon, State Street, and Franklin Templeton, says it is actively exploring the application of distributed ledger technology (DLT) to FX forwards in an effort to increase transparency and workflow efficiencies to the currency market. As part of this pilot, Vanguard has […]
Tag: FX forwards
TriOptima saw a 71% increase in the gross notional value of FX forward contracts going into the triReduce CLS FX compression service last year. This means that $9.1 trillion was eliminated from counterparties’ FX forward portfolios in 2019, a new record for the service. In Q4 alone it compressed $4.9 trillion of gross notional value, […]
The average daily volume (ADV) of FX trades submitted to CLS in May was $1.62 trillion, marginally down from the $1.63 trillion it reported in April. The ADV of FX swaps submitted to CLS in May was $1.19 trillion, down 4.14% month-on-month and down 5.3% year-on-year. The ADV of FX forwards trades submitted to CLS […]
Commerzbank and German corporate Thyssenkrupp say that this week they traded an FX forward with the transaction being instantaneously replicated in a Blockchain successfully.
The use of Blockchain completely eliminates the need for a manual or semi-automated reconciliation between the client and the bank, thereby drastically reducing operational risks in FX transactions, the firms say.
The deal was in a one month EUR/PLN in EUR 500,000, and was initiated by Thyssenkrupp using FX Live Trader, Commerzbank’s FX trading platform. The deal confirmation was sent to Thyssenkrupp directly via Corda, a distributed ledger designed for finance by the R3 blockchain consortium. ?
The European Supervisory Authorities (ESAs) today released a statement acknowledging challenges for certain counterparties to exchange variation margin for physically settled FX forwards under EMIR by January 3, 2018.
Based on the material presented to the ESAs, it notes the implementation appears to mainly pose a challenge regarding transactions with certain end users.
The requirement to exchange variation margin for physically settled FX forwards is part of a globally agreed framework that aims to ensure safer derivatives markets by limiting the counterparty risk from derivatives trading partners, notes ESAs. The international standards state that variation margining of physically settled FX forwards is both an established practice among significant market participants and that it is a prudent risk management tool that limits the build-up of systemic risk, and thus that variation margining should apply to physically settled FX forwards.
A new paper published by the Bank for International Settlements (BIS) asks the question, what would balance sheets look like if the borrowing through FX swaps and forwards were recorded on-balance sheet, as the functionally equivalent repo debt is?
The authors of the report, FX Swaps and Forwards: Missing Global Debt? observe that these products “create debt-like obligations” and state that non-banks outside the US owe large sums of dollars off-balance sheet through these instruments. They add that the total is of a size similar to, and probably exceeding, the $10.7 trillion of on-balance sheet dollar debt.
The derivatives industry can breathe a sigh of relief regarding new variation margin (VM) requirements, as it now looks like majority of market participants will be ready for them, according to the International Swaps and Derivatives Association (ISDA).
In a posting on the ISDA website, the association’s CEO, Scott O’Malia, notes that as recently as six months ago “the industry was facing the possibility of real disruption”.
“With the variation margin ‘big bang’ set for implementation on March 1, but with only a fraction of the necessary changes to documentation completed, there was a very material risk that a large part of the market wouldn’t be able to trade,” he comments.
Following hot on the heels of its second ownership change in a relatively short time, Hotspot is maintaining the momentum of change by launching new products, specifically outright deliverable forwards. It has also announced a raft of new hires and sought to broaden its geographical footprint. Galen Stops speaks to senior staff at the platform about what these changes – which include the addition of non-deliverable forwards to the platform – are building towards, as well as their view on the changing FX market structure.
Hotspot has revealed that the first anonymous outright deliverable forward FX transaction has been executed on its platform.
Hotspot says that is the first platform to provide outright deliverable forwards on an anonymous central-limit order book, and that it is also the first platform to allow prime brokerage clients to post passive quotes.
This is designed to allow for expanded trading activity from market participants, who will be able to trade without being forced to cross the bid-offer spread.
Paul Millward, head of product strategy, and Paul Reidy head of technology, spearheaded the project, which culminated in a one-month EUR/USD trade, of $100,000 notional value.