Post-trade shared-ledger platform Cobalt wins this year’s best trading infrastructure provider at the AFTAs, knocking off previous winner, Trumid Financial. The win comes down to Cobalt’s private network that leverages distributed-ledger technology (DLT) to bring efficiencies to post-trade processes and significantly reduce cost and risk for foreign-exchange (FX) market participants.
Andy Coyne, co-founder and CEO of Cobalt, says that while DLT holds the potential to revolutionize many processes, including those in post-trade FX, in its purest form, some practical issues exist. These, he says, specifically regard throughput and anonymization, which render it inappropriate for financial infrastructure purposes. “For example, public permissionless blockchains, such as those used to verify bitcoin transactions, were developed to enable a transfer of value between unknown and untrusted counterparties. This is very different to the private, trusted and heavily-regulated networks in which banks operate and trade,” he says.
Cobalt utilizes the “more appropriate” parts of DLT, such as distribution, encryption and the ability to provide a single version of a transaction with multiple perspectives.
Cobalt estimates that 50 to 80 percent of back-office work is spent on reconciliation and the total market spend for FX alone is in the tens of billions of dollars, as complex cost structures incur multiple license fees, messaging charges, IT overheads, and staff costs.
The creation of a confirmed, shared and normalized portfolio of trade data frees up middle- and back-office resources currently devoted to reconciliation by ensuring that there is only one golden version of each contract. Coyne says this unique ecosystem delivers immediate cost and efficiency benefits.
In April 2017, the firm launched Cobalt BlueSky, which allows ledger members to enable controlled access to their data for third-party specialist service providers. Cobalt has partnered with business and technology firms such as Solace and BT Radianz to enhance its data and interconnectivity capabilities. Other partners include Equinix, Kx Systems, LMRKTS and BestX.
It currently has signed up over 20 institutions to the platform, including Citadel Securities and XTX Markets.
Cobalt is working toward the launch of its live platform in the first quarter of 2018. Its fully-functioning beta environment currently processes more than 100,000 trades a day.
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