Cobalt is being deployed in the BT Radianz Cloud to make it easier for financial firms to integrate the foreign exchange post-trade processing network which uses distributed ledger technology, and to accelerate global growth.
Adrian Patten, co-founder and chairman of Cobalt, told Markets Media that the platform has been built over three years and the firm decided use the BT Radianz Cloud in September last year.
“It’s critical that banks have the most secure system and we recognise that because of this, passing banks’ vendor risk management process can be onerous,” he added. “Deploying our infrastructure on the BT Radianz Cloud enables us to meet our customers’ high security requirements and strict service level agreements.”
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The majority of settlement in the foreign exchange market takes place through the CLS, the bank-owned infrastructure. Cobalt was set up to cut 80% of costs through allowing more efficient management of trades though their life cycle before settlement using a distributed ledger. This technology allows the creation of a single shared record for every foreign exchange trade rather than each firm recording its own ledger on multiple systems. These errors are usually fixed manually and as a result costs can be reduced in areas such as as affirmation matching, credit maintenance and monitoring and aggregation.
Yousaf Hafeez, head of business development at Radianz Services, BT told Markets Media: “One of our clients observed that Cobalt is taking FX post-trade from the days of old, inefficient systems based on legacy technology into the modern world.”
Cobalt has developed a range of middle and back office processes that can plug into any distributed ledger technology. Clients can choose how to integrate their own systems with Cobalt, which can then connect to CLS or another settlement system.
“We have known Cobalt for a number of years and they ticked all the boxes on our fintech checklist in terms of the benefits they can bring to our customers,” added Hafeez. “This is a real service that is ready to go and not a proof of concept.”
CLS and IBM this week announced a collaboration on a proof of concept for LedgerConnect − a DLT platform to enable financial services firms to deploy, share and consume services hosted on a shared network. Nine financial institutions, including Barclays and Citi, are participating in the proof of concept.
Patten said: “While other firms in the blockchain space have been experimenting with the technology, we have designed, built and tested a solution to a very specific and pressing challenge in FX and are now making it live with BT Radianz.”
He continued that several institutions, including some of the biggest foreign exchange market makers, will be adopting Cobalt’s technology over the next few months.
“This is the first scalable blockchain project in financial services and our solution will deliver a significant reduction in risk and costs while improving the efficiency of post-trade processing in the world’s largest financial market,” Patten added.
Virginie O'Shea, research director at consultancy Aite Group, noted that regulators are increasingly positive towards the use of cloud technology to increase efficiency in financial services.
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The US Treasury said in its report: "Facilitating the further development and incorporation of cloud technologies, machine learning, and artificial intelligence into financial services is important to realizing the potential these technologies can provide for financial services and the broader economy."
Hafeez said BT Radianz can help Cobalt reach clients globally as the firm covers the largest FX centres including London, New York, Hong Kong, Tokyo and Singapore.
In May Singapore Exchange made a strategic investment in Cobalt which the fintech said will support continued expansion, accelerate technology development and hiring staff.
Michael Syn, head of derivatives at SGX, said in a statement at the time: “We look forward to seeing Cobalt continue to gain traction in the global post-trade FX market as they pioneer FX technology development, delivering cost and risk mitigation benefits to market participants across the world.”