Capitolis Expands FX Novation Product for Agency Flow

Capitolis has unveiled what it terms a “significant innovation” to its FX novation service with the addition of the ability to novate agency trades while maintaining anonymity. The firm says this unlocks more of the FX options market for novations by including agency flow, and further helps to reduce risk, notional and capital footprint.

Agency novation is a very complex workflow as anonymity has to be maintained throughout the entire process that could involve many participants. For these reasons, very few agency novations have been performed up until this point. “The industry needed a trusted partner who had the experience, network, and relationships throughout the entire FX options market to get this done,” Capitolis says. “Capitolis was that partner.”

The firms says it worked with industry participants for over a year to understand all the needs of the market and develop their agency offering. The automation of agency flow novations now allows for the collapsing of nearly all boxed FX option positions and the ability to execute a novation even in the most complicated cases.

“We challenged Capitolis to deliver technology to facilitate agency novation and they delivered,” says Marcus Butt, global head of prime services at NatWest. “The improved operational efficiencies remove much of the friction that previously impeded these novations. As a result, we anticipate clients more actively optimising their portfolios.”

Gaurav Prinja, head of compression at Brevan Howard, adds, “We usually insist that our portfolio managers trade in and out with the same agency brokers, but with this new feature in the Capitolis novation platform, we no longer mandate that requirement. Now our portfolio managers have a wider liquidity pool from which to choose.”

Since launching the novation service five years ago—the first of its kind for the FX options market— Capitolis says volumes continue to grow. To date, it has novated over 81,000 trades and reduced total notional by over $9 trillion.

“We partnered closely with industry participants to understand their needs and delivered on them. I’m thrilled that Capitolis is the only provider that can offer agency novation,” says Gil Mandelzis, CEO and founder of Capitolis. “Our network continues to grow, and we see huge potential as we safely expand execution opportunities within the FX options market, while further helping to reduce its risk and capital footprint.”