A group of 11 banks, including NatWest and Deutsche Bank, have been trialling a DLT-based platform for intraday FX swaps.
The FX swaps market sees $3.2 trillion of daily volume but swaps have traditionally been overnight and longer.
Banks hope that by using intraday swaps, treasury teams can borrow for hours at a time, enabling them to efficiently meet a temporary liquidity need. This not only helps to optimise intraday liquidity buffers, it also offers an opportunity to lend excess funds, representing a new revenue stream.
The trial participants, including Bank of Ireland and Banca Mediolanum, used technology from Finteum, which has been working on a DLT-based intraday FX swaps platform first announced with R3 and Fnality in 2019.
During the trial, the banks engaged in simulated trading and discussion sessions. Over the course of one of the hour-long simulated trading sessions the banks executed 76 intraday FX swap transactions, based on 66 orders in a central limit order book and 69 bilateral RFQs.
The plan now is to move to live transactions later this year or early in 2022.
Brian Nolan, Finteum co-founder, says: “We are excited for the next phase of development. The engagement and feedback from the banks during the trial was very encouraging. It reinforces the value the initiative can offer to banks across all geographies."