FXCH Ltd. (the FX Clearing House) is a Dublin-headquartered blockchain startup, founded by a team of institutional FX veterans looking to fill the gap left by major banks pulling out of the FX prime brokerage market. On Friday it cleared the first ever Institutional Spot-FX transaction using a distributed ledger for settlement.
At the newly established Clearing House, members can submit trades transacted on any institutional FX platform to be cleared and settled by FXCH. Focusing at first on non-bank participants, the firm explains that it aims to solve the counterparty trust problem by organising the governance of its member-based clearing organisation with rules, a guaranty fund and tightly controlled default mechanisms.
Franck Mikulecz, founder of FXCH, commented: “We embraced the Blockchain technology for its strongest but most overlooked property: the trust machine. Streamlining steps to settle FX trades at a fraction of the current costs is brilliantly disruptive. But the ledger opens the possibility of creating a level of trust only Tier-1 Banks are enjoying today, without the need to rely on $100Bln balance sheet. That is a true revolution.
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Our work is greatly facilitated by the incumbent Tier1 banks generally pulling out of the FX Prime Brokerage market. Banks are no longer inclined to lend their credit lines for their clients to trade FX, and the gap this leaves in the market isn’t filled adequately by prime-on-prime providers.”
Martin Dyring-Andersen, FXCH’s CTO, added: “In order for a technology to find its place, it needs to be understood by a majority in an industry. By combining best of breed blockchain technology with our domain specific know-how, we offer all participants a transparent distributed proof of ownership overcoming the hard trust objections plaguing today’s process of settling FX trades.”
Justyna Hammon, FXCH’s head of business development, marked the high goals for the venture: ”With an open-for-business policy and a fast onboarding process, eventually FXCH wants to become the go-to central counterparty for all Spot-FX participants globally.”