HSBC and Wells Fargo have completed the first interbank Payment vs Payment (PvP) settlement outside of CLS using distributed ledger technology from Baton Systems.
The two bank are now using Baton's Core-FX platform to settle FX trades bilaterally on demand in less than three minutes, on a PvP basis with legal settlement finality.
The vendor says the project represents a profound change in FX settlements, enabling banks to tackle risk in FX settlements generally and in emerging market currencies that sit outside the framework provided by the CLS system.
Arjun Jayaram, CEO and Founder of Baton Systems, comments: “Today’s announcement demonstrates the tremendous potential this technology presents to FX market participants globally to improve their risk management, intraday liquidity controls and funding profiles. Using proven technology that is readily available today, banks can now take control and completely revolutionise their entire post-trade process from trade-capture through to settlement.”
As part of the implementation for settlement in US dollar, Canadian dollar, GBP and euro transaction, both banks have agreed to the Baton Rulebook, a framework designed to provide legal certainty around settlement finality.
The parties hope to expand the system to add more participants and to introduce a central Financial Market Infrastructure provider to administer the platform rulebook.