FXSettle is a revolutionary settlement solution that delivers advances in both the risk management and cost model for institutional FX transactions. FXSettle leverages FXMarketSpace’s platform and CME Group’s central counterparty model to intelligently route trades dealt on FXMarketSpace directly to the customer’s bank or their agent for settlement. This increases back office efficiencies and enables costs to be driven out of the settlement process. FXSettle is backed by CME Clearing, which guarantees settlement and has USD 5 billion in financial safeguards to protect the clearing prime brokers and their customers.
This service is only available to FXMarketSpace customers, and two banks are currently live with one onboarding. Trades are already being settled daily using FXSettle.
With the introduction of FXSettle, customers now have a choice in how they settle completed trades and have the ability to cut the costs associated with settlement. FXSettle provides increased efficiency whilst protecting against both settlement risk and replacement risk.
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WHY?
Why is FXMarketSpace launching FXSettle?
Over the past few years much of the market growth has been driven by the high frequency
algorithmic traders, who are particularly sensitive to cost. Customer feedback suggests that lower
settlement charges will encourage these buy- and sell-side traders to trade more, benefitting the
whole industry. By launching FXSettle the FXMarketSpace platform is now able to protect against both settlement risk and replacement risk. This is something
that should not be underestimated, particularly in the current credit challenged markets.
Why have no other platforms tried to do this before?
This type of settlement (“On Us” settlement) will only work for a trading platform using the
Central Counterparty model. Few trading platforms use this model and none have a central
counterparty with the track record and risk disciplines of CME Clearing to guarantee the
trades.
How does it work?
Trades dealt on FXMarketSpace are novated to CME Clearing. CME Clearing holds accounts with
FXSettle banks. Ahead of settlement date, trades are intelligently routed directly to the customer’s
bank or the agent for settlement. A book entry transfer takes place between the customer and CME
Clearing. Finality of payment is guaranteed by CME Clearing and partner FXSettle banks.
How is this service charged?
Currently there are no charges for FXSettle. FXMarketSpace plans to start charging clearing
prime brokers a fee in Q4.
In what regions is this approved / supported?
FXMarketSpace is offering this service globally, where they have received authorisation. “On
Us” settlement already takes place in most markets, but the settlement bank in each region should
ensure they are settling in an approved manner.
For a complete list of countries where trading on FXMarketSpace is available, please visit the Customers Web page.
Does this only benefit banks?
The benefit of reduced settlement costs apply to both bank and non-bank customers, and are
particularly appealing to the high frequency trader.
FXSettle is enabled by settlement banks in three ways -
a) Settling their own FX trades, supporting proprietary trading
b) Settling for their trading customers, supporting prime brokerage
c) Offering 3rd party services to other clearing prime brokers
