OSTTRA partners with Baton to limit FX settlement risk
06 March 2024 Global
Image: Yingyaipumi
OSTTRA has partnered with Baton Systems to launch an on-demand payment-versus-payment (PvP) service.
Baton will provide its distributed ledger technology to deliver the service which has been designed to limit FX settlement risk, or Herstatt Risk.
Arjun Jayaram, founder and CEO of Baton Systems, says: “Through this partnership, we will accelerate and globally scale access to PvP settlement while enabling the Baton team to continue innovating and deploying operationally resilient solutions that deliver modern, cloud-based interoperable technology stacks that make our markets more inclusive, efficient and safer.”
Last year, the Bank for International Settlements’ Committee on Payments and Market Infrastructures advocated for an increase in the adoption of PvP in FX transactions to mitigate Herstatt risk.
OSTTRA claim the launch forms part of a wider strategy to improve the structure of over-the-counter (OTC) markets.
Chris Leaver, chief strategy and marketing officer at OSTTRA, explains: "There’s scope for further post-trade efficiencies across OTC asset classes: this new service represents a milestone in the evolution of our FX network, extending existing workflows to reduce settlement risk for thousands of OSTTRA clients.”
The system is available to FX market participants globally and initial participants include HSBC and Wells Fargo. The banks will join OSTTRA in the first-half of 2024.
Mark Williamson, global head of FX and commodities partnerships and propositions at HSBC, comments on the decision to join the system: “By using OSTTRA as a post-trade platform, the wider market will now be able to use the same technology to reduce their FX settlement risk through PvP settlement and compression, as well as optimising their cash flows.”
Baton will provide its distributed ledger technology to deliver the service which has been designed to limit FX settlement risk, or Herstatt Risk.
Arjun Jayaram, founder and CEO of Baton Systems, says: “Through this partnership, we will accelerate and globally scale access to PvP settlement while enabling the Baton team to continue innovating and deploying operationally resilient solutions that deliver modern, cloud-based interoperable technology stacks that make our markets more inclusive, efficient and safer.”
Last year, the Bank for International Settlements’ Committee on Payments and Market Infrastructures advocated for an increase in the adoption of PvP in FX transactions to mitigate Herstatt risk.
OSTTRA claim the launch forms part of a wider strategy to improve the structure of over-the-counter (OTC) markets.
Chris Leaver, chief strategy and marketing officer at OSTTRA, explains: "There’s scope for further post-trade efficiencies across OTC asset classes: this new service represents a milestone in the evolution of our FX network, extending existing workflows to reduce settlement risk for thousands of OSTTRA clients.”
The system is available to FX market participants globally and initial participants include HSBC and Wells Fargo. The banks will join OSTTRA in the first-half of 2024.
Mark Williamson, global head of FX and commodities partnerships and propositions at HSBC, comments on the decision to join the system: “By using OSTTRA as a post-trade platform, the wider market will now be able to use the same technology to reduce their FX settlement risk through PvP settlement and compression, as well as optimising their cash flows.”
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