Citi leverages blockchain for spot FX pricing and execution

This tool, part of the larger Project Guardian, spearheaded by the Monetary Authority of Singapore (MAS) and the financial industry, aims to revolutionize the way bilateral spot FX trades are priced and executed.

Currently, the application has been tested with USD/SGD spot FX, but its underlying technology holds the potential for extension to any fiat currency pair. However, it’s important to note that this innovative solution is not yet available to clients.

Leveraging blockchain for pre-trade and execution in FX trading

The core of Citi’s application lies in its on-chain solution, which facilitates the real-time streaming of price quotes and ensures the recording of trade executions on a blockchain. This integration into the blockchain infrastructure brings several advantages, notably the immutable and cryptographically secure record-keeping of trade data. The design of the application aligns with institutional practices and regulatory requirements, ensuring that only involved parties in a quote or trade can access the detailed trade information.

Sam Hewson, Head of FX Sales at Citi, emphasized the strategic direction of this development: “We are taking steps towards building foundational capabilities to offer liquidity, pricing, and risk management to our global clients wherever they choose to trade – be it on traditional rails or on blockchain.”

The application’s request for streaming (RFS) feature explores the use of oracles for bilateral messaging. This innovation enables best execution analysis through real-time post-trade analysis on a single platform, marking a significant advancement in FX trade execution and analysis.

Shobhit Maini, Co-Head of Digital Assets for Markets at Citi, provided further insight into the objective behind this initiative: “While blockchains have demonstrated promise for streamlining post-trade processes, our objective is to drive improvement at all stages of the trade life cycle, including pre-trade and execution.”

Citi’s collaboration with notable industry players like T. Rowe Price Associates, Inc and Fidelity International under Project Guardian underscores the application’s significance and the broad interest it has garnered. Blue Macellari, Head of Digital Asset Strategy at T. Rowe Price Associates, Inc, highlighted the importance of this development: “Developing user-friendly institutional-grade execution is key to future scalability. This application is an important first step towards unlocking the value of a full end-to-end blockchain-based trading lifecycle.”

Citi’s Blockchain FX Solution

Emma Pecenicic, Head of Digital Propositions and Partnerships, APACxJ Distribution, Fidelity International, also reflected on the broader implications of this technology: “Distributed ledger technology will revolutionize financial systems over time and has the potential to democratize access to financial services and alternative investments. As a global asset manager, we are very keen to engage with partners like Citi to explore technological innovations like its Blockchain FX Solution, to understand the efficiencies it can bring to our processes and ultimately for the benefit of investors.”

For its current phase, the application utilized a private permissioned instance of the Avalanche blockchain to capture price quotes and trade confirmations specific to each counterparty. This choice of blockchain highlights Citi’s commitment to ensuring security and exclusivity in its operations.

The implications of Citi’s blockchain-based FX trading application extend beyond just technological innovation. It signifies a shift in how financial transactions, particularly in the FX domain, might be conducted in the future, emphasizing security, efficiency, and compliance with institutional and regulatory standards.