CobaltFX has launched an alternative post-trade messaging service to reduce risk in FX and combat the lack of competition in the market.
According to Andy Coyne, founder of CobaltFX, a Single Point of Failure (SPoF) in FX post-trade messaging – created by market consolidation – poses a threat to the entire global financial ecosystem.
Coyne highlights that a number of ‘overdue’ core improvements need to be made, including execution messages having alternative solutions that can run free of charge.
“Our clients raised two key concerns about the industry to us which were the main drivers for this launch. Firstly, the consolidation of multiple services into a single parent company resulted in a concentration risk. Secondly, a recent hack of a service provider significantly disrupted market operations. Whilst this didn’t affect the FX industry, it highlighted a potential issue which could severely impact our sector,” Coyne told The TRADE.
“Clients were concerned that they didn’t have a plan B should there be a cybersecurity attack. They wanted to make sure something was in place which they could easily switch over to if necessary. Even regulatory bodies are becoming increasingly concerned about this – so this is where CobaltFX has stepped in.”
CobaltFX aims to tackle these issues with its new Trade Notification Network (TNN), which has been developed in response to increasing concerns across the industry from financial institutions related to SPoF.
TTN looks to provide banks with alternative choices for post-trade FX messaging and offers a backup plan in the event of cyberattacks and other forms of failure in the FX market.
CobaltFX stated that the new offering will enable the industry to break free from the ‘Hobson’s choice’ it has been dealt for decades – where alternative options are essentially limited.