Today blockchain startup Finteum revealed that 11 banks participated in a trial of its FX intraday swap solution. NatWest, Deutsche Bank, Bank of Ireland, Banca Mediolanum and seven others banks participated with $14.5 trillion in combined balance sheet values. The solution is planning live trades in late 2021 or early 2022.
According to BIS figures, global FX daily trading in 2019 amounted to $6.6 trillion daily, of which $3.2 trillion were FX swaps.
So what’s the problem that intraday FX swaps aim to solve for banks? It’s all about bank treasurers managing intraday liquidity. Too much liquidity or too big an intraday buffer may not earn an optimal return at the central bank. Too little liquidity means payments need to be delayed or throttled. A big part of this juggling is the fact that FX transactions typically settle in two days.
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