Fourteen large banking groups have completed a trial to execute intraday repo and intraday FX swaps through an interbank platform built by Finteum and a number of these banks plan to go live on the service when this is released in 2023.
The trial involved treasury and technology teams from major global banks including BNY Mellon's corporate treasury function, Barclays, Citi and NatWest Group and involved simulated trading sessions to test the capabilities of the platform, during which participants executed 96 simulated intraday repo and FX swap transactions with an aggregate US$11 billion traded, based on 75 simulated orders in a central limit order book and 165 bilateral request for quotes (RFQs).
Representatives from the national prudential authorities and liquidity experts from UK Finance, a representative body for the banking and finance industry, were also involved in the trial simulations and subsequent discussion. The trial assumed DvP settlement using Euroclear Bank’s triparty infrastructure. BNY Mellon’s triparty infrastructure can also be used to settle US dollar intraday repo transactions executed on the Finteum platform.
Finteum indicates that it is one of the first interbank venues to support intraday FX swaps and intraday repos alongside each other in the same platform, enabling treasury teams to use these two markets interchangeably to manage their financing requirements.
Three large Europe-based banks plan to go live with the Finteum platform in Q2 or Q3 2023 when this is released by the London-based fintech company.
The Finteum solution uses R3 Corda enterprise blockchain technology, in parallel with a range of settlement solutions, which may include DLT-based settlement rails such as the Fnality Payment System and non-DLT infrastructure such as Euroclear Bank’s triparty service.
Further simulations involving real money test trades are expected later in 2022.
Finteum has financed its development work on the project to date through angel investor funding and expects to close a seed funding round prior to releasing the platform next year.
Participants in the trial indicate that the Finteum initiative is an important element in their liquidity optimisation strategy, enabling banks to borrow for hours at a time through the intraday liquidity facility that this offers. This helps them to optimise management of their intraday liquidity buffers and, potentially, to reduce their costs by millions of dollars each year — while also being able to lend excess liquidity using the intraday repo facility.
Commenting on the advance of the project, Finteum co-founder Brian Nolan says: “Given the rising interest rate environment, intraday markets play an important role in banks’ liquidity optimisation strategy. We are excited to continue working with the key participant banks and to include more banks in the group ahead of go-live in 2023”.
