Osttra Launches FX Timing Solution

Osttra has expanded the capabilities of its portfolio reconciliation service TriResolve to address what it terms “one of the industry’s major dispute drivers”, timing mismatches in FX.

The firm explains its new FX Snap Time Prediction Model automatically identifies and flags valuation discrepancies which stem from differences in the time at which the market rate was captured by each counterparty. The prediction model uses historical trade valuation data to form an advanced time-series analysis and, by combining this data with the prevailing market rate, the model identifies when a trade’s mark to market (MTM) value was determined. It then applies the same analysis to the trading counterparty and calculates whether a discrepancy is caused by a timing mismatch.

Osttra cites a survey from last year by FMSB which identified FX timing mismatches as one of the most common causes of margin disputes, as firms, and even entities within the same firm, take their snaps at different times. Consequently, MTM values frequently diverge based on when each counterparty snapshots the market rate. These small discrepancies can cause margin disputes, which are time-consuming to resolve and can lead to additional capital requirements, the firm observes.

The system collects and analyses data 24 hours a day, five days a week to fully capture global FX trading, and Osttra says following a successful four-week testing phase with nine major firms, the model is now live for all clients. It adds it has observed that it successfully predicts the snap times for over 95% of applicable trades for a number of firms. Osttra says it is continuing to enhance prediction rates as well as bringing more insights to the root causes behind exposure differences between market participants.

“The FX Snap Time Prediction Model helps our customers solve a long-standing market challenge,” says Carl Thornberg, head of optimisation and analytics technology at Osttra. “By isolating valuation discrepancies caused by snapshot timing, we are helping market participants eliminate false positives, allowing them to focus resources on real risk.”

Warren Rees, executive director, CPG & collateral operations, digital & platform services, at JP Morgan adds, “FX timing mismatches have historically been a significant operational hurdle. By distinguishing discrepancies attributable to snapshot timing, operations teams can more efficiently triage exceptions and escalate where further review and oversight may be required.”