Standard Chartered Investment Boosts Cobalt As FX Utility

Darren Coote, chief executive at Cobalt, said the investment by Standard Chartered last month establishes the firm as a core utility in the foreign exchange market.

Cobalt provides infrastructure for the foreign exchange market based on shared ledger and high-performance technology. Standard Chartered joined the platform in February this year and also became an investor last month.

Coote told Markets Media: “Standard Chartered’s investment further establishes Cobalt as a core utility in the FX market and is a great endorsement for other clients to join the network.”

He continued that half a dozen of the largest FX liquidity providers are on the platform and others will join this year. For example, Citi also joined the platform this year.

Gareth James, macro chief operating officer at Standard Chartered, said in a statement: “We see Cobalt as being a core part of our FX operating platform, enabling Standard Chartered to reduce risk and costs by automating manual processes across the bank and therefore improving services to our clients.”

Standard Chartered has a strong franchise in emerging markets.

Coote said: “Emerging markets are a focus as they are not covered by CLS and are quickly growing market share. Clients in this region benefit from Cobalt’s ability to make netting much more efficient.”

The majority of settlement in FX takes place through the CLS, the bank-owned infrastructure.

Cobalt was launched to reduce costs by approximately 80% through more efficient management of trades though their life cycle by developing a range of middle and back office processes that can plug into any distributed ledger technology. This allows the creation of a single shared record for every type of foreign exchange trade rather than each firm recording its own ledger on multiple systems.

Clients can choose how to integrate their own systems with Cobalt, which can then connect to CLS or another settlement system. Cobalt also allows banks to brand the technology to use for their own clients.

Darren Coote, Cobalt

“In the last six months we have upgraded the platform to a full microservices architecture,” added Coote. “The technology is more scalable and easier for clients to deploy, and they can also white label our services.”

Microservices breaks a problem into small components of functionality, while ensuring that the data they use is consistent in real-time. Firms can stop using monolithic architecture which is difficult and expensive to change without building a new version of the whole application.

Covid-19

Coote continued that the Cobalt team did an “exceptional” job in upgrading the system while continuing to seamlessly function remotely during the Covid-19 pandemic.

“Cobalt’s hosted platform has proven particularly resilient during the pandemic and ideal for clients to access and manage FX post-trade remotely,” added Coote.

In June the Global Foreign Exchange Committee discussed the operational challenges caused by the pandemic in a teleconference.

“Overall, participants felt that the transition had been smooth, with no major operational issues arising,” said the committee in a report.

Participants said they were actively planning to ensure they can operate some elements of the remote working arrangements on a longer-term basis.

“Considerations noted included the need to continue making progress on workplace flexibility, the importance of ensuring that new staff, and particularly new junior staff, are effectively trained outside of the traditional trading floor environment, and the need to ensure continued focus on strategic planning and medium-term change initiatives,” added the report.

The GFXC also discussed the Bank for International Settlements’ 2019 Triennial Survey of FX markets which suggests that the proportion of trades being settled without payment-versus-payment protection may have increased.

“The amounts involved, and hence the risks posed, are potentially very significant, and require continued engagement from front and back offices in the FX market,” added the committee. “In light of that, the GFXC and local FX committees will consider ways to assist with gaining a better understanding of trends in settlement activity and with supporting the management and reduction of FX settlement risk, including reviewing the guidance in the Code.”

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