After a number of years having to take reactionary measures in
response to new regulatory requirements, panellists at Profit & Loss’ Forex Network New York conference expressed
enthusiasm for a new wave of innovation that has the potential to re-shape FX
As more financial services firms look for ways to utilise blockchain technology within their infrastructures, Galen Stops examines whether the technology is really as safe as advocates claim, following two high-profile hacks earlier this year.
“Cyber and system security is one of the most important issues facing markets today in terms of integrity and financial stability,” said Commissioner Christopher Giancarlo of the Commodity Futures Trading Commission (CFTC) on September 8, when approving system safeguard requirements for derivatives clearing organisations.
Giancarlo is hardly alone in his concerns.
Franck Mikulecz, managing director of FXCH, talks to Galen Stops, deputy editor of Profit & Loss, about how blockchain technology can help mitigate some of the credit challenges facing the FX industry.
With blockchain, or distributed ledger technology, still being so new to financial services, Mikulecz claims that banks are still trying to figure out the most effective way to deploy this technology.
“I can see a lot of banks have an interest because they know that the market will evolve and the market will potentially be disrupted by the technology but they don’t really know how it’s going to happen and they don’t really know how to use it themselves.
The Depository Trust & Clearing Corporation (DTCC) has completed its proof-of-concept for using a distributed ledger based solution to manage the clearing and settlement of US Treasury, Agency, and Agency Mortgage-Backed repurchase agreement (repo) transactions.
Working with Digital Asset, the two companies have demonstrated the successful netting of “start” leg repo transactions with prior end-of-day net securities obligations in the DTCC environment. With Phase One now complete, DTCC and Digital Asset have progressed to Phase Two, where they will form a Stakeholder Working Group comprised of leading market participants active in the $3 trillion per day U.S. repo and related transaction market to collect independent feedback and ensure the solution is aligned with industry needs.
For all the hype and excitement around distributed ledger technology (DLT), speakers at the Forex Network Chicago conference debated the real value of decentralised systems such as blockchain.
“If you’re trying to build a business you need to make it cheaper, quicker, with better customer services and hopefully allow people to have more access. Let’s be honest, blockchain fails on nearly all of those things,” asserted Adrian Patten, co-Founder and chairman of Cobalt.
Patten added that the existing system for agreeing contracts has some elements that are beneficial, such as mediation, that decentralisation doesn’t necessarily allow for. By contrast, he described some of the things that he’s witnessed in the decentralised crypto trading space as “bloody scary”, adding: “A lot of these exchanges are being run on laptops and they’re lucky if they have Excel”.
HSBC has now settled more than three million FX transactions and made more than 150,000 payments worth $250 billion using distributed ledger technology (DLT), it announced today.The bank’s DLT solution, called HSBC FX Everywhere, has been used for the past year to orchestrate payments across HSBC’s internal balance sheets.HSBC highlights three key benefits of the solution. The first is that it provides a shared, single version of “the truth of intra-company trades”, from execution through to settlement, which reduces risk of discrepancy and delay. Secondly, it means that confirmation and settlement is automated by matching and netting transactions, which reduces costs and reliance on external settlement networks.