State Street, Vanguard and Symbiont complete first live trade for FX forward contracts through blockchain
07 December 2021 UK
Image: Siarhei
State Street has completed the margin calculation process for a live trade of a 30-day foreign exchange forward contract through the use of Assembly, Symbiont’s distributed ledger technology.
In collaboration with Vanguard and Symbiont, State Street has been actively exploring the application of blockchain technology to undertake margin processing for foreign-exchange forwards and swaps, with the goal of bringing post-trade workflow automation, significantly reducing counterparty credit risk in the over-the-counter currency market.
Harnessing the benefits of blockchain technology, the forwards market will eventually enable the underlying contracts to also be instantiated, signed, executed and documented on a single unalterable record, says State Street.
This will digitally secure the trades and allow for automation over their duration, it adds.
Deploying these contracts on distributed ledger technology (DLT) facilitates more frequent and automated valuations, while also enabling parties in the network to move and settle collateral instantaneously — significantly reducing counterparty risk and streamlining processes for those forwards that are non-cleared and subject to margining.
Nadine Chakar, head of State Street Digital, says: “State Street Digital is incredibly pleased to have collaborated with both Vanguard and Symbiont on this monumental industry initiative to digitise the margining process around collateralised foreign exchange forward contracts that will reduce our customers operational challenges through process automation and state of the art technologies.”
Warren Pennington, head of Vanguard’s investment management fintech strategies group, comments: "Leveraging cutting-edge DLT represents a giant leap forward in foreign exchange market structure by reducing counterparty risk, automating previously manual processes, and mitigating potential disputes through standardised calculation processes. The lower risk and increased speed will lead to lower costs and improved outcomes for investors.”
In collaboration with Vanguard and Symbiont, State Street has been actively exploring the application of blockchain technology to undertake margin processing for foreign-exchange forwards and swaps, with the goal of bringing post-trade workflow automation, significantly reducing counterparty credit risk in the over-the-counter currency market.
Harnessing the benefits of blockchain technology, the forwards market will eventually enable the underlying contracts to also be instantiated, signed, executed and documented on a single unalterable record, says State Street.
This will digitally secure the trades and allow for automation over their duration, it adds.
Deploying these contracts on distributed ledger technology (DLT) facilitates more frequent and automated valuations, while also enabling parties in the network to move and settle collateral instantaneously — significantly reducing counterparty risk and streamlining processes for those forwards that are non-cleared and subject to margining.
Nadine Chakar, head of State Street Digital, says: “State Street Digital is incredibly pleased to have collaborated with both Vanguard and Symbiont on this monumental industry initiative to digitise the margining process around collateralised foreign exchange forward contracts that will reduce our customers operational challenges through process automation and state of the art technologies.”
Warren Pennington, head of Vanguard’s investment management fintech strategies group, comments: "Leveraging cutting-edge DLT represents a giant leap forward in foreign exchange market structure by reducing counterparty risk, automating previously manual processes, and mitigating potential disputes through standardised calculation processes. The lower risk and increased speed will lead to lower costs and improved outcomes for investors.”
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