Transparent FX Swap Execution

Turn days of manual work into minutes of automated verification. Every swap detail—rates, amounts, timestamps, parties—is recorded on a shared, immutable ledger. This creates a single source of truth, eliminating the costly reconciliation failures common in legacy systems where each party maintains separate records.

• ROI Driver: A major bank reported a 70% reduction in operational costs for post-trade processing by implementing distributed ledger technology for derivatives.

Provide regulators and internal auditors with instant, permissioned access to the complete transaction lifecycle. The immutable audit trail is built-in, proving execution fairness, best execution compliance, and counterparty identity without manual data aggregation.

• Compliance Benefit: Dramatically simplifies MiFID II and EMIR reporting requirements. Audit preparation time can be reduced from weeks to hours, turning compliance from a cost center into a demonstrable control advantage.

Cut out multiple intermediaries (correspondent banks, clearinghouses, custodians) that add layers of fees and latency. Peer-to-peer execution on a blockchain network facilitates direct settlement, passing significant cost savings to both parties.

• Quantifiable Impact: Industry analysis suggests blockchain can reduce total FX settlement costs by 30-50% by streamlining the complex web of intermediaries involved in cross-border transactions.

Move from manual, phone-based trading to algorithmic and smart contract-driven execution. Set predefined rules for hedging strategies that trigger automatically based on market conditions, even outside traditional banking hours.

• Strategic Advantage: A multinational can automatically roll over hedges or execute tactical swaps in response to news events, optimizing treasury management without manual intervention.

Traditional swaps rely on bilateral credit lines and central clearing counterparties (CCPs), creating systemic risk and capital inefficiency. Smart contracts enable collateral automation and real-time risk visibility.

• How it works: Pre-programmed smart contracts automatically manage margin calls and liquidate collateral if thresholds are breached, visible to all permissioned parties.
• Business Value: Reduces capital requirements for credit support, improves balance sheet efficiency, and provides CFOs with an immutable, real-time audit trail of all obligations.

Manual reporting for MiFID II, EMIR, and internal audits is costly and error-prone. Every transaction on a permissioned blockchain is an immutable, timestamped record.

• Key Benefit: Regulators can be granted permissioned access to a golden source of truth, enabling near real-time Regulatory Technology (RegTech) reporting.
• ROI Quantified: Firms like ANZ Bank have reported a 50-70% reduction in trade reporting costs and near-elimination of reconciliation errors through DLT pilots.

Eliminate the manual, error-prone process of reconciling FX swap transactions across multiple ledgers. A distributed ledger provides a single source of truth, automating settlement and reducing operational risk. Key benefits include:

• 70-80% reduction in failed settlements and associated investigation costs.
• Near-instant confirmation of trade details between counterparties.
• Automated matching of payment-versus-payment (PvP) legs, cutting settlement times from T+2 to minutes.

Provide regulators with a tamper-proof, chronological record of every FX swap, from initiation to final settlement. This simplifies compliance with regulations like MiFID II and Basel III. Business value delivered:

• Drastically reduces the cost and time of regulatory audits and reporting.
• Creates an indisputable record for dispute resolution, protecting against costly litigation.
• Enhances transparency for internal risk management and governance committees.

Smart contracts can automate collateral management and margin calls in real-time based on pre-agreed rules and live market data. This minimizes exposure and capital requirements. Real-world impact:

• Dynamic collateralization reduces the need for large, static credit lines, freeing up capital.
• Automated margin calls prevent disputes and ensure timely coverage of mark-to-market exposures.
• Projects like HQLAᵡ demonstrate how tokenized assets can be used as high-quality collateral on-chain.

Major banks are not waiting; they are building together. Utility Settlement Coin (USC) projects and Fnality are creating blockchain-based payment systems to settle tokenized assets, including FX. Key movements:

• J.P. Morgan's Onyx processes billions in daily transactions, showcasing live intraday repo and other money market activities that underpin FX liquidity.
• These consortia reduce reliance on costly intermediaries and create new models for 24/7 liquidity management.

The business case centers on hard cost savings and efficiency gains. A typical large multinational can justify the investment through:

• Operational Cost Savings: Reduction in back-office FTEs dedicated to FX trade processing and reconciliation.
• Liquidity Optimization: Faster settlement cycles improve working capital efficiency.
• Risk Cost Avoidance: Mitigation of settlement failure penalties and credit losses.
• Compliance Cost Reduction: Lower spend on audit support and regulatory reporting systems.

Adoption follows a pragmatic, phased approach that minimizes disruption. Successful strategies include:

• Start with a closed-loop network of trusted counterparties for specific currency pairs.
• Integrate with existing TMS and ERP systems (e.g., SAP, Oracle) via APIs, avoiding a 'rip-and-replace' scenario.
• Partner with a regulated blockchain infrastructure provider to handle the technical complexity and legal framework.
• Focus on interoperability standards to ensure future connectivity with other networks and traditional systems.