UK-based fintech startup Cobalt has added electronic trading houses Citadel Securities and XTX Markets to its impressive list of participants who have committed to become users of its new blockchain-based institutional forex settlements platform.
Cobalt has developed a post-trade processing system for the currency market that utilizes distributed ledger technology to increase the processing time for trades as well as to reduce post-trade costs. Cobalt is among the first companies to create a large-scale financial solution using blockchain technology.
Due to the blockchain’s inherent security features such as immutability and quick resolution of any mismatched data, it provides an effective solution for the trade settlements infrastructure in the currency markets. Currently, banks are spending large amounts of money on technology they need in order to provide trust and verification for secure trading and Cobalt believes it can remedy this using the blockchain.
Cobalt Chairman, Adrian Patten stated: “We started off with a problem we were looking to solve. We came into this as blockchain skeptics. Our goal is to be the ledger for the post-trade FX market. What we’re trying to do is to have a one-time reconciliation for FX transactions - a golden record - and post that transaction and cash-flow information onto one distributed ledger.”
This “golden record,” Cobalt believes, will be able to cut up to 80 percent of the 500 million post-trade costs. Cobalt new technology is set to launch in the third quarter of 2017. The two electronic trading houses Citadel Securities and XTX Markets are joining 22 other financial institutions that will take part in the launch of the new blockchain-powered platform. Other participants include market leader, Citigroup, as well as leading forex market makers Deutsche Bank and UBS, among others.
“We’ve got significant endorsement from two of the largest institutional FX trading participants in the market, who are leaders in technology. What we are particularly pleased about is that these guys know technology. It’s a big part of their business. They’ve been testing for months and are prepared to support us in improving the market infrastructure. It’s important to them to have cost-effective infrastructure as the cheaper those costs, the more aggressive you can be on your pricing,” said Patten on the addition of Citadel Securities and XTX Markets to its list of clients.
Zar Amrolia, the co-chief executive of XTX Markets stated, "We are delighted to be part of the Cobalt initiative to reduce risk and cost in post-trade FX, and we look forward to working with them and other members of the network to transform the landscape.”
While Citadel Securities global head of eFx, Kevin Kimmel was quoted saying the technology is “an important step in enhancing FX market efficiency, particularly around credit and clearing.”