UBS and CIBC have successfully completed a groundbreaking intraday FX swap transaction using the DLT-enabled Finteum Platform, marking a significant milestone in the financial sector.
The transaction involved an EUR/USD intraday FX swap, which was negotiated on the Finteum Platform and executed via the TP ICAP UK MTF in just a matter of minutes. Both legs of the swap were settled by the banks at pre-agreed times on the same business day (T+0).
This innovative trade type is expected to create ultra-short-term interbank markets, significantly reducing banks’ High Quality Liquid Assets (HQLA) requirements for intraday liquidity. The cost of maintaining HQLA has become particularly burdensome, especially with interest rates declining more slowly than anticipated, potentially costing large banks up to $75 million annually.
Finteum asserts that it is one of the first interbank venues to concurrently offer FX swaps and repo transactions within one platform, providing substantial value to bank treasury teams that utilize these markets interchangeably for funding purposes.
Rupert Hume-Kendall, former chair of Bank of America Merrill Lynch International and now vice-chair of Finteum, remarked: “Recent regulatory scrutiny has underscored the necessity for banks to have access to a diverse range of liquidity tools. Intraday FX swaps and repo are increasingly integral to liquidity management strategies among global banks, and we are thrilled to collaborate with many of the world’s largest institutions to implement this groundbreaking technology and reduce their costs.”
In April, a trial on the Finteum Platform for USD intraday repo saw participation from 14 global banks, including Barclays, NatWest, and Citi, demonstrating the potential of the intraday repo market with simulated settlements. Live repo trades on the Finteum Platform are anticipated to begin in 2024.
The Finteum Platform is designed to seamlessly integrate with existing market infrastructures and utilizes R3’s Corda, a permissioned distributed ledger technology for regulated markets. This DLT framework allows both parties to facilitate money and securities transfers without the need to handle and reconcile traditional confirmation messages. Additionally, post-trade actions such as early maturity or trade cancellations can be managed through the Finteum Platform.
Anthony Clark-Jones, who oversees the Strategic Ventures portfolio at UBS Investment Bank, stated: “This world-first trade via Finteum represents a significant advancement towards the realization of the commercial, risk-related, and client benefits associated with truly digital capital markets, complementing recent strides made in areas like institutional digital cash and digital collateral.”