New Platform Targets Inter-Dealer FX Swap Market

A new platform has been launched by innovation lab and incubator FastFin Labs, which seeks to enhance the inter-dealer FX swaps market by supporting the needs of voice and API traders on swaps and STIRT desks.

FXSwapX has been created by FastFin Labs, which  is led by Richard Leader, co-founder of FX HedgePool; and Simon Wilson-Taylor, founder of State Street’s GlobalLink and FX Connect, founder of Molten Markets, and co-founder of Loop FX, and has stepped outside of its normal environment of creating trading applications and workflow solutions for third parties, but says it expects to partner with a new or industry consortium to bring the platform to market “quickly and globally”, with the full regulatory and operational support of the partner. The firm adds industry working groups will provide oversight and direction for the new platform.

FXSwapX is targeted at solving what FastFin Labs terms “key issues” facing the interbank FX swaps market, namely the creation of trusted reference rates computed from bank data, yet without any bank being required to disclose their proprietary data; a trading process that recognises and fully supports the trading needs of voice traders on  STIRT/FX desks while also enabling API connections from those banks who have created internal electronic order books for FX swaps; and a matching process that prioritises large transactions – ideally suited for the FX swaps market while also making it very difficult to ‘game’ the process, or extract information.

The firm adds that an innovation of FXswapX is its implementation of secure multi-party computation (MPC) homomorphic encryption (HE) techniques. “This cutting-edge approach allows FXswapX to derive trusted market insights from banks’ encrypted price data streams without ever exposing or decrypting the underlying information,” Leader explains, “Ensuring both security and confidentiality, and eliminating any possible opportunity for collusion in data generation.”

Dr. Andrei Lapets is a cryptography advisor to FXswapX and co-founder of MPC partner firm Choose K, he adds, “Unfortunately there has been a history of manipulation and collusion in benchmarks used for trading across the capital markets, resulting in significant fines. The solution pioneered by my team ensures that each bank’s data remains fully encrypted at all times, even while we perform complex computations to produce trusted benchmarks that are ideally suited for trading purposes.”

In the latest FX Joint Standing Committee turnover survey, just over $600 billion of the near-$1.7 trillion FX swaps daily turnover in the UK was executed via an electronic broker, a single or multi-dealer system. That around 60% of turnover in the world’s largest FX swaps centre is still voice or manual highlights the potential for platforms seeking to build volumes. The vast amount of trading is in the short-end, where brokerages and spreads are lower, but there is still a good opportunity – something that FastFin Labs is clearly trying to tap into.