Today London-based Cobalt and Californian Baton Systems announced a partnership to provide a joint middle and back-office DLT solution to foreign exchange (FX) clients. Both firms have major institutional backers, with Baton boasting JP Morgan as a client and Cobalt’s customers include Standard Chartered, Citi, Deutsche Bank and XTX Markets. Cobalt also has an IHS Markit integration and investment.
Each of the post-trade solutions has a different emphasis, although both reduce client risk. In Cobalt’s case, it provides a shared record for an FX trade, which is then leveraged in middle office solutions such as confirmations, netting and credit management, as well as other post-trade steps.
“The FX industry is rife with opportunities for modernisation, but legacy systems lag behind much of the financial services industry in terms of innovation,” said Darren Coote, CEO of Cobalt.
Baton Systems‘ focus is on visibility, collateral management and settlement. The startup is keen to highlight that it does not use digital currencies for its payments and instead offers integrations with existing legacy collateral and cash systems. A key benefit is instant reconciliation and reporting.
“By integrating our real-time PvP FX settlement process with Cobalt we can deliver improved visibility and control over the settlement process to a new segment of the market, eliminating many of the systemic risks currently plaguing the industry,” said Arjun Jayaram, CEO of Baton Systems.
Four months ago, Cobalt announced its entry into the digital assets space and has integrated with the major cryptocurrency exchanges. It offers full credit and ledger services for both fiat currencies and digital assets.