Citi has developed an innovative application that uses blockchain infrastructure to price and execute bilateral spot foreign-exchange (FX) trades.
The application is a part of Project Guardian(i), a collaborative initiative by the Monetary Authority of Singapore (MAS) and the financial industry. While the current phase of the application tested spot FX for USD/SGD, the underlying solution could be used for any fiat currency pair. The application is not currently available to clients.
Citi’s on-chain solution provides real-time streaming of price quotes while recording trade executions on a blockchain, which supports the immutable, cryptographically secure record-keeping of trade data. At the same time, allowing for compliance and conformity with institutional practices and where applicable regulatory requirements, with only counterparties to a quote or trade having access to the underlying trade details.
Sam Hewson, Head of FX Sales at Citi, said: “We are taking steps towards building foundational capabilities to offer liquidity, pricing and risk management to our global clients wherever they choose to trade – be it on traditional rails or on blockchain.”
“While blockchains have demonstrated promise for streamlining post-trade processes, our objective is to drive improvement at all stages of the trade life cycle, including pre-trade and execution.”
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The request for streaming (RFS) application explores the use of oracles for bilateral messaging and would enable best execution analysis through real-time post-trade analysis on a single platform.
Shobhit Maini, Co-Head of Digital Assets for Markets at Citi, said: “While blockchains have demonstrated promise for streamlining post-trade processes, our objective is to drive improvement at all stages of the trade life cycle, including pre-trade and execution.”
Citi collaborated with T. Rowe Price Associates, Inc and Fidelity International on its application under the Project Guardian initiative.
Blue Macellari, Head of Digital Asset Strategy at T. Rowe Price Associates, Inc, said: “Developing user-friendly institutional grade execution is key to future scalability. This application is an important first step towards unlocking the value of a full end-to-end blockchain based trading lifecycle.”
Emma Pecenicic, Head of Digital Propositions and Partnerships, APACxJ Distribution, Fidelity International said: “Distributed ledger technology will revolutionise financial systems over time and has the potential to democratise access to financial services and alternative investments. As a global asset manager, we are very keen to engage with partners like Citi to explore technological innovations like its Blockchain FX Solution, to understand the efficiencies it can bring to our processes and ultimately for the benefit of investors.”
A private permissioned instance of the Avalanche blockchain was used for the current phase to capture price quotes, as well as trade confirmations specific to each counterparty.
(i) The Monetary Authority of Singapore’s Project Guardian is a collaborative initiative with the financial industry that seeks to test the feasibility of applications in asset tokenization and DeFi, while managing risks to financial stability and integrity.
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