AFTAs 2022: Best trading infrastructure initiative—FX HedgePool

Project: X•Match:Swap

Overview

Since its founding in 2019, FX HedgePool has worked on transforming the structure of the foreign exchange (FX) market by introducing a peer-to-peer matching platform for institutional FX transactions. The platform offers institutional investors transparent, anonymous and direct liquidity to a community that includes some of the world’s largest buy-side institutions. By facilitating the direct sourcing of liquidity among peers, FX HedgePool enables institutional investors to reduce market impact, lower trading costs, improve tracking error, and reduce operational demands, regardless of market conditions.

What problem does it solve?   

Historically, the FX market has been plagued by inefficiencies that have affected fund performance. They have introduced additional costs for institutional investors that filter down to the investments that end-investors rely on for their retirement and other purposes. As a result, FX HedgePool developed a peer-to-peer network for FX swaps, using modern and agile technology.

“Worth over $2 quadrillion per year, FX is the largest financial market in the world. The efficient running of this market is essential, so we challenged the status quo and built the world’s first viable peer-to-peer matching platform, giving our buy-side members a new source of liquidity. Sourcing predictable and benign liquidity directly from peers is a significant market structure upgrade that unlocks new efficiencies for the benefit of all.”
Emin Tatosian, CTO and co-founder, FX HedgePool

Measurables

Analysis of FX HedgePool’s trades from February 2022 using BestX’s expected cost data showed that single ticket spreads with large FX HedgePool orders were significantly narrower compared with the expected costs of executing those trades in the market. Users saved approximately 75% in spreads and 90% fewer trades were required for market negotiation. FX HedgePool delivers 30 product releases (upgrades) annually.

Future developments

With over 30 institutions now using the platform and more than $4 trillion in matched FX trades, FX HedgePool is planning to:

  • Launch an FX spot matching service for the WM/Reuters benchmark by the end of 2022.
  • Enter into a number of key institutional platform and technology alliances, including OMS/EMS service providers to enhance workflow automation.
  • Extend the currency pairs it offers on the platform, depending on client demand.

Why they won

We hear frequently about industry disruptors across the financial services industry, although in many instances that epithet is overused. That cannot be said about FX HedgePool as it continues to challenge the incumbent players and market structure across the FX realm. Not only has it introduced a viable peer-to-peer FX swaps network connecting institutional investors, but in doing so it has delivered substantial savings to its users through tighter spreads and reduced trade volumes. 

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