Scotia Capital is the first bank in North America to offer FX market-making capabilities to other banks via Cognotec's Liquidity Linq service. The service enables smaller banks to tap into a reservoir of liquidity in currencies in which the bank does not make markets.
The service is made possible by Cognotec electronically linking banks that use the company’s e-commerce platforms (AutoDeal Lite and AutoDeal Direct). An AutoDeal bank can be a liquidity provider with another being a liquidity taker. Takers can use the service to offer an expanded range of currencies to their customer base or extend their service on a 24-hour basis. So far, 35 of the 90 banking users of AutoDeal have adopted the Liquidity Linq service.
As a liquidity provider, Scotia Capital will electronically receive real time requests for prices made by the liquidity-taking bank’s clients. The Scotia Capital price is then delivered to the requestor electronically. All deals are processed on a full STP basis and invisibly to the end client. Customer details and credit risk remain with the liquidity-taking bank.
Barry Wainstein, managing director and global head, foreign exchange and money market, Scotia Capital, says the service has created the opportunity to penetrate a new market segment of regional banks, in an efficient and cost effective manner.