The combination of the proliferation of real time payments and higher interest rates has raised the stakes for bank intraday liquidity costs and risks. Various DLT-based solutions aim to help banks with the challenge, including intraday repo and intraday FX swaps. Finteum has developed a DLT-based intraday FX swap offering, with UBS and CIBC processing the first live transaction last year.
A key benefit of intraday FX swaps is that they reduce the need for banks to keep pre-funded balances in lots of currencies. Instead, they can use FX swaps to access the needed currency when the demand arises.
Finteum considers itself to be settlement agnostic. It has conducted trials with other DLT settlement systems such as Fnality since its early days, and also supports real time gross settlement systems, which is not ideal from a settlement risk perspective. To address the settlement risk challenge, Finteum has now partnered with Partior to enable the settlement of the swap legs to be executed as a payment versus payment (PvP) transaction. Adhara has enabled the integration using its DC Commander technology. This aims to make the solution plug-and-play while avoiding the need to overhaul existing systems.
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