BNY Mellon and Deutsche Bank have developed a new joint custody FX solution aimed at significantly reducing confirmation times for restricted emerging markets currency trades.
The digital solution, a new application programming interface (API), is initially being applied to custody FX transactions in Korean Won. It aims to reduce the pre-trade lifecycle from hours to seconds, minimising the operational complexity and manual intervention that can be prevalent in emerging market custody FX processes.
Indonesian Rupiah and the Indian Rupee are the next targeted markets for the joint solution, which will then be progressively rolled out to a broad range of restricted currencies linked to investors’ underlying equity or fixed income trades.
“With this partnership, we are not only seizing an opportunity to alter back-office processing in restricted markets, but more importantly, we are providing front-office users with faster execution and enhanced workflow transparency,” said Jason Vitale, global head of FX, BNY Mellon.
The two banks with leverage the existing bots which had previously been used for instantaneous communication on trade statuses in order to help eliminate market frictions.
Digital innovation in FX markets has accelerated in emerging markets, particularly in Asia, with securities denominated in those currencies are increasingly being included–or more heavily weighted–in emerging-market indices and exchange-traded funds (ETFs).
“This is a milestone in solving a long-standing challenge in emerging markets, with broad application for the industry and our clients. This demonstrates our commitment to market leading execution, at a time when investor participation and focus on costs in these markets are increasing,” added David Lynne, APAC head of fixed income and currencies, and corporate bank, Deutsche Bank.
“The collaboration between the two organisations leverages our strengths and expertise in emerging markets, custodial FX, as well as digital work-flow and innovation.”