Sell-Side Technology Awards 2019: Best Distributed-Ledger Project—Baton Systems

Baton Systems, which offers two distributed ledger-based platforms for clearing FX transactions and settling margin collateral, wins this year's best DLT project.

Ed Ridgway, Louis Rudd and Bruce Wolf.

Baton Systems wins this year’s best distributed-ledger technology (DLT) project, thanks to its Baton Systems Platform. The company has two distributed ledger-based platforms: one that processes clearing of foreign-exchange (FX) transactions and another that settles margin collateral.

Baton’s FX clearing platform is built on a shared, permissioned distributed ledger that sits on top of existing banking infrastructure. Since its launch in April last year, the FX platform has settled over $10 billion in trades per day and is poised to end the year handling between $70 billion and $120 billion per day. Baton partnered with NEX Optimisation and a global bank on its post-trade solution for spot FX, a project aimed at easing real-time settlement. Arjun Jayaram, Baton Systems’ founder and CEO, says the platform’s success comes from its unique proposition to the industry in that there is no need to replace legacy systems to access the service. “We’ve gone through the hype cycle and have seen that the technology has real potential,” he says. “We can use distributed ledger to solve issues and there’s no need to rip and replace existing technologies. We want to prove that our products work and I think we’ve done that. So now we’re looking to expand our user-base.”

Jayaram adds that using distributed-ledger technology provides more efficient ways of sharing information needed for clearing and settlement as each party already has their own golden copy of the data. This allows banks and their counterparties to automate reconciliation or exceptions checking, a far cry from the previous method of manually checking each data point.

According to Jayaram, the platform speeds up clearing and settlement to three minutes from 48 hours, and counts Citi, CME Group and the Bank of England among its clients. He says the FX platform currently settles six currencies, although Baton will be testing at least six more during the second quarter of this year and possibly expanding the number of currencies it handles to around 10.

Baton’s next step is to work on a system for the International Swaps and Derivatives Association’s (Isda’s) Common Domain Model (CDM). CDM is intended to be a single, standard way of representing derivatives trade events digitally. Baton participated, and won, a hackathon sponsored by Isda to host the CDM on its platform. “We’re bullish about Isda’s Common Domain Model as it changes the market in a big way,” Jayaram says.

According to Jayaram, DLT has come so far that even though it is still evolving, the industry is starting to solve more problems. He says there is still a long way to go but those companies and projects with viable solutions are the ones that will grow the technology further. 

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