Cobalt snags this year’s best back-office initiative category at the AFTAs from SmartStream, winner of the 2016 and 2017 editions, thanks to its foreign-exchange (FX) reconciliation platform.
The company wanted to re-engineer post-trade functions for the FX market, a process it sees as too complex, with a shared record of transactions that makes reconciliation much easier, according to Cobalt’s CEO, Andy Coyne. “We create a single, shared record of transactions—think of it as a utility or an infrastructure—which is why it’s affordable,” he says. “It simplifies the workflow in what we think is a unique approach to blockchain. Our offering kills layers of reconciliation and is the first post-trade FX infrastructure that was built to meet the industry’s exacting standards. At a minimum, we are targeting the $20 billion in FX transaction infrastructure costs, considering most major banks spend more than $500 million on post-trade FX alone.”
Coyne notes that Cobalt’s approach to the back office offers information pertinent to the transaction, although participants will only be able to access their own data. He adds that by deploying a shared ledger for FX transactions, firms will see improved lifecycle management and enjoy the benefits from methods like compression, which are easier to do when reconciliation processes aren’t overly protracted.
Cobalt, which received investment from Citi, the Singapore Exchange and former Deutsche Bank COO, Henry Ritchotte, went live on the BT Radianz Cloud ecosystem in August 2018 to expand its clientele looking to use its blockchain-based offerings. While on the Radianz Cloud, it is continuing to onboard additional clients.
The past year saw Cobalt introduce more risk-reducing features to its FX post-trade infrastructure. Coyne says Cobalt’s 2019 upgrade roadmap includes assessing workflows related to credit, new features and improvements around work sharing.
Cobalt considers the FX market as ripe for innovation, particularly the post-trade space where investment has been slow. “We chose the FX market because we are domain experts and we know how it operates,” explains Coyne. “The industry has been looking for ways to be more efficient and, particularly since the financial crisis, it has been really focused on providing more value. There was no competition in the post-trade process for market participants, so investment in it was largely ignored. Post-trade is the last bastion of inefficiency for the FX market.”
Coyne predicts that more investment will be made in post-trade processes, particularly in the FX market, as companies continue to demand more efficiency and value from their workflows.
Bryan Cross, who heads UBS Asset Management's QED group, joins to discuss alternative data and AI.Subscribe to Weekly Wrap emails