Distributed ledger FX post trade system will reduce costs and alleviate reconciliation issues
SETL and Cobalt DL, a private peer-to-peer network that reduces post trade cost and risk for financial market participants through distributed ledger technology, today announced a partnership to deploy the SETL OpenCSD within the Cobalt FX post trade platform. The service is set to launch in 2017, with 15 leading institutional FX participants already committed to the service.
In today’s FX market, legacy infrastructure is duplicative and inefficient as a single trade creates multiple records for all parties, including buyers, sellers, brokers and clearers. FX market participants incur multiple unnecessary license fees, ticketing charges, IT overheads and staff costs as a result of the complexity of existing structures. By creating a shared view of trade data, Cobalt DL frees up back and middle office resources from multiple layers of reconciliation. The Cobalt FX platform is designed to integrate seamlessly with all trading sources and venues, providing immediate efficiency benefits which has shown to deliver a significant cost reduction when compared with existing infrastructure.
Cobalt DL will create a single, shared view of each FX transaction using SETL’s OpenCSD platform. The immutable record will obviate disagreements and reconciliation problems between participants and is expected to result in significantly reduced costs. Cobalt DL’s combination of market expertise and forward-thinking technology will dramatically shake up the post trade space.
The SETL OpenCSD distributed ledger to be deployed by Cobalt DL will be a depository of trade information, captured in the Cobalt post trade reconciliation system. SETL OpenCSD is able to process high burst speeds, and has the capacity to process many billions of transactions per day. The record will provide cryptographic proof of a contract and of the parties’ agreement to the trade terms. Participants will be able to retrieve details of their own trading activity from the ledger in a manner which absolutely verifies their inclusion in the shared record, but does not allow them to examine other participants’ activities.
Andy Coyne, co-founder of Cobalt DL added: “We have undertaken an exhaustive review of the technology in the DL space and have chosen to partner with SETL due to their demonstrated technical leadership in the field, their ability to process trades at scale and their team’s deep understanding of financial services. The FX market requires systems to be able to achieve high burst transaction throughputs per second with daily capacity in the millions. SETL were able to demonstrate resilient working technology comfortably processing at both high burst and steady state speeds and in excess of 1.4 billion transactions a day – an absolute necessity in the high volume FX market. The SETL OpenCSD platform provides a real-world interface and API structure that will allow us to fully integrate it into our solution.”
Peter Randall, CEO of SETL commented: “We are extremely pleased to be working with Cobalt and their partners on this ground-breaking project. The Cobalt team are leaders in the field of FX processing and our common focus on speed and resiliency makes us natural partners. This is not a proof-of-concept or a prototype; it will be a revenue generating implementation of distributed ledger technology.”