“The addition of CNH demonstrates the ease and speed that PvP access can be extended across currencies, empowering firms to radically reduce settlement risk exposure fast.”
Baton Systems has announced that large financial institutions are deploying its DLT-powered Core-FXTM platform to efficiently reconcile, net, and safely settle bilateral CNH foreign exchange (FX) transactions on a PvP basis.
The solution is said to be able to eradicate CNH settlement risk, increase market access and open up extensive offshore trading opportunities for Chinese Renminbi for wholesale participants.
Renminbi is now the 5th most traded currency (as reported by the 2022 BIS Triennial Survey of turnover in OTC FX markets).
CLS wants to de-risk FX market but pool does not include Renmibi
CLS has done a huge amount for de-risking the FX market, but the pool of currencies does not include currencies such as Renminbi and emerging market currencies. Baton is providing this service for new currencies and is offering safe, riskless settlement for financial institutions who are members of CLS and also significantly those who are not.
Baton’s initial roll-out covered USD, GBP, CAD and EUR transactions and now the firm is making its stand with the addition of Offshore Yuan (CNH) settlement on a Payment-vs-Payment (PvP) basis between large financial institutions.
The company plans to further expand PvP access by onboarding additional non-CLS eligible currencies onto the Core-FX platform over the coming months.
“A historic breakthrough”
Arjun Jayaram, CEO and Founder of Baton Systems, commented: “Today’s announcement marks a historic breakthrough. By deploying operationally resilient solutions, able to seamlessly interoperate with a bank’s existing payment gateways and processes, we have been able to operationalize the benefits of blockchain to deliver a world first by using DLT specifically designed to meet the capital market’s extensive compliance requirements. The addition of CNH demonstrates the ease and speed that PvP access can be extended across currencies, empowering firms to radically reduce settlement risk exposure fast.
In achieving riskless settlement for CNH, Baton is breaking new ground by extending the benefits of on-demand riskless settlement to a virtually unlimited range of market participants and currencies.
All of the transactional workflow, from trade reconciliation, to netting, to settlement is captured and hashed on Baton’s permissioned distributed ledger, the firm explained, adding that the entire process, including the guaranteed movement of funds and settlement finality is established and enforced under the auspices of the Baton Rulebook.
The addition of CNH extends the pool of currencies the banks have been processing using Baton’s Core-FXTM platform over the past 11 months to include the first non CLS-eligible currency to be settled by unaffiliated entities. Since the platform’s initial roll out, which commenced with settlement between affiliated entities, trillions of dollars of FX transactions have been netted and safely settled via PvP.
