DeFinity Steps into the FX Settlement Race
Posted by Colin Lambert. Last updated: May 10, 2021
In its 2019 Triennial Survey of FX Turnover, the Bank for International Settlements (BIS) highlighting settlement risk in FX markets, stating it remained significant in spite of progress made since the turn of the century. This theme was taken up by the Global FX Committee which has presented a number of proposed changes to the FX Global Code’s recommendations on settlement risk for market feedback.
Reducing settlement risk in FX markets is something that has been tackled by CLS, of course, and more recently Cobalt and Baton Systems, but a decentralised finance (DeFi) company, DeFinity, is now throwing its hat into the ring, saying it is working to deliver a near real-time settlement ecosystem to help FX market participants settle their cash FX, forwards, swaps, and NDF transactions “at a fraction of the cost of traditional routes”.
DeFinity is a layer-2 protocol and decentralised exchange solution, utilising existing blockchain frameworks including WeOwn, Ethereum, Polkadot, Binance Smart Chain, and Cardano. With a focus on interoperability, the firm says its ambition is to create a more inclusive decentralised ecosystem that helps to bridge the old with the new.
“We hope to introduce settlement efficiencies into the traditional asset space that we believe will help established and under-capitalised market participants alike improve their service to clients, investors, pension funds, and their own bottom line in the case of proprietary trading firms and hedge funds,” says Manu Choudhary, CEO of DeFinity.
Michael Siwek, chief revenue officer of DeFinity, adds: “Over the last decade the FX market has evolved to offer reduced last-look times, technology that accurately measures market impact and information leakage combined with record-low order matching speed through state-of-the-art networks. The crucial aspect of credit is important to many participants that may not qualify for Tier 1 credit access. The DeFinity solution enables regulated retail and under-capitalised firms to access primary markets using the DeFinity settlement platform, which makes it an attractive solution in the $6.6 trillion daily FX market.”