Banks Trial Intra-Day FX Swaps

As automation levels grow in the FX swaps market and demand builds for more intra-day liquidity in treasury businesses, 11 banks, including Deutsche Bank, NatWest, Bank of Ireland and Banca Mediolanum, have been trialling a platform for intra-day FX swaps.

The project, which was first announced in 2019, is based upon a platform delivered by fintech Finteum in association with R3 and Fnality. It has recently added RFQ functionality to the platform and although it is built to work with distributed ledger technology (DLT) such as Fnality’s Payment System, the firm says it will integrate with “the best possible settlement solutions, which could include non-DLT technology such as CLS Now”.

During the trial, the banks engaged in simulated trading and discussion sessions, focused on the capabilities and features of the software, and its potential benefits. Over the course of one of the hour-long simulated trading sessions the banks executed 76 intra-day FX swap transactions, based on 66 orders in a central limit order book and 69 bilateral RFQs.

The solution will allow bank treasury teams to access funding and optimise intra-day liquidity usage, thus reducing their Basel-related costs. The regulatory trades will be executed with a pre-defined time for the second leg, which will be, naturally, later the same day. Five currencies have been included in the trial, USD, EUR, GBP, CHF and CAD.

“The engagement and feedback from the banks during the trial was very encouraging,” says Brian Nolan, co-founder of Finteum. “It reinforces the value the initiative can offer to banks across all geographies. While every bank treasury team is focused on controlling costs, efficient optimisation of liquidity buffers is often overlooked by senior management. It is great to see the banks from the trial encouraging their peers to join the initiative and optimise the cost savings for all involved.”