Yesterday thyssenkrupp traded a foreign exchange forward contract with Commerzbank. The pilot involved writing a copy of the transaction to a blockchain.
The transaction was a one-month forward contract worth Euro 500,000 to convert to Polish Zloty.
Currently, delays in the reconciliation process for foreign exchange transactions introduces operational risk, given the dynamic nature of forex.
Commerzbank expects significant benefits from post-trade matching and confirmation using a distributed ledger (DLT). For corporate treasuries, it enables real-time liquidity. For both sides, it eliminates the reconciliation process. The process would also eliminate the need for the third party solutions used by banks to send transaction confirmations.
However, to go live with a system like this, there are still some technical, regulatory, and legal hurdles.
R3’s Corda is the technology used for the DLT.
Nikolaus Giesbert, a Commerzbank Divisional Board Member, said: “Reconciliation is a major issue for banks when trading FX. Significant resources are dedicated to resolving the issues that occur during the matching process. This deal demonstrates how the use of distributed ledger can transform and digitalize the processes in this space.”
Thomas Empelmann, Head of Corporate Finance, thyssenkrupp AG, commented: “The comprehensive insight into the Blockchain process clearly shows how to connect market participants in the future in a highly secure and efficient manner while reducing transaction costs by avoiding external software solutions. The simplified process with maximum transparency reduces the hurdles for financial integration and allows us to rethink existing processes.”