Following a recent trial with 19 banking groups, UBS and Natwest are two of the banks that have committed to go live on the the Finteum intraday platform. Finteum is a DLT platform that enables orders and execution of intraday financial transactions. Later this year it plans to go live with an FX swaps solution, with repo and securities lending to follow.
Intraday liquidity solutions enable banks to specify the settlement window for transactions, reducing the amount of High Quality Liquid Assets (HQLA) they need to keep as reserves.
A 2018 report from Oliver Wyman found that for large banks with $100 billion in liquidity reserves, the carrying cost was around $100 to $300 million annually. It concluded that a 25% reduction in the intraday liquidity requirement could net savings of $25 to $75 million. However, in 2018 the figures were based on a carry cost of 1%. With rising interest rates, the cost savings of reducing liquidity by a quarter could be four or five times that, so $100 – $375 million.
The latest Finteum trial in Q2 of 2023 included clearing banks for six different home currencies CAD, CHF, EUR, GBP, JPY and USD, with regulators present as observers. Finteum ran a couple of polls amongst participants, including one about managing intraday liquidity. It found that 94% were interested in intrady and overnight funding markets such as the Finteum Platform. Central bank facilities came second at 75% and commercial bank credit lines, payment throttling and queue reordering were 30% or less.
The Finteum FX swap solution
At its core Finteum’s is an order and execution platform. Because it uses R3’s Corda enterprise blockchain, there’s no need for message confirmations and reconciliations. That’s critical because intrady transactions don’t have sufficient time for reconciliations. The data on the ledger is shared between the participants of the transaction.
For the launch the platform will use existing Real Time Gross Settlement (RTGS) systems to settle swaps. As we previously reported, there are plans to use the Fnality blockchain settlement network once it gets the regulator’s green light to go live. Finteum is also able to integrate with other infrastructures, including triparty systems such as BNY Mellon’s and Euroclear’s, T2S and other DLT platforms, including HQLAᵡ, Baton Systems’ Core-FX and RTGS.global.
The banks that have signed on for the go-live are currently integrating Finteum with their systems. Finteum itself is more or less ready for production, having already completed security (penetration) tests for its network. The startup is looking to attract additional banks in a second wave and is considering offering incentives such as small amounts of warrants.
Amongst international banks, UBS has been extremely interested in intraday transactions for a very long time. It co-founded the Utility Settlement Coin project, which evolved into Fnality. It was amongst the first batch of banks to go live on HQLAᵡ, the blockchain solution that supports intraday collateral swaps. And it was also one of the first banks to go live on Broadridge’s distributed ledger repo (DLR) platform, which also supports intraday.