The Global Financial Markets Association (GFMA) recently explored accelerating foreign exchange (FX) settlement times, but found significant challenges. It concluded it was unclear whether the FX market has an appetite for more T0 activity, given the need for significant investment.
As context, the BIS Committee on Payments and Market Infrastructures (CPMI) published a report on payment versus payment (PvP) in order to reduce significant FX settlement risks in the $7.5 trillion daily FX market. It estimates the risk is $2.2 trillion daily. FX as a key aspect of cross border payments is currently a G20 agenda item. The CPMI’s paper explored several new PvP payment systems, with more than half using distributed ledger technology (DLT).
Last week GFMA published a paper, incluing input from 25 large banks. It outlines three drivers behind accelerated settlement, and one is the regulatory interest gathering steam, as highlighted by the CPMI report.
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