CobaltFX launches alternative post-trade messaging service to strengthen FX market
CobaltFX introduces a new Trade Notification Network (TNN) to provide a robust alternative for post-trade messaging in the FX market, addressing systemic risks posed by Single Points of Failure (SPoF).
Industry veteran Andy Coyne of CobaltFX, a part of United Fintech, has highlighted a critical threat to the global financial ecosystem—a Single Point of Failure (SPoF) in FX post-trade messaging, exacerbated by years of market consolidation.
The British fintech’s newly launched alternative post-trade messaging service is a strategic move to mitigate these risks and introduce much-needed competition into the FX post-trade messaging landscape.
“Recent incidents, such as consolidation and a hack that disrupted market operations earlier this year, have raised concerns among major global banks about the inherent risks associated with SPoFs in FX operations and this has been a major call to action for us in launching the TNN. Further to that, we strongly believe that post-trade messaging is not a service that should be charged for. In the 21st century, messaging should be free and only value added services that use that data should be chargeable”, says Andy Coyne.
Tackling systemic risks in FX Post-Trade operations
Coyne points out that the lack of competition and the recent disruptions caused by consolidation and cyberattacks have underscored the vulnerability of the world’s largest banks. These institutions are currently overexposed to SPoF risks, with no alternative or backup, leaving them susceptible to potentially catastrophic cyber security events. CobaltFX’s TNN aims to offer a safety net, ensuring that banks have a choice and a contingency plan in place.
CobaltFX asserts that in the digital age, the basic exchange of execution messages should be free, and only value-added services utilizing this data should incur charges. This philosophy is at the core of their TNN, which seeks to revolutionize the current model by offering free messaging services, thereby challenging the status quo of the industry’s “Hobson’s choice.”
The introduction of TNN by CobaltFX is not just an advancement for the FX market but is also crucial for the resilience of the entire financial ecosystem. By providing a backup plan and a new choice for post-trade messaging, CobaltFX is taking significant steps to safeguard against systemic risks and potential trading halts that could impact global financial stability.
“The FX market, by sheer trading volume, is amongst the world’s largest markets, making the need for comprehensive solutions even more pressing. Imagine if banks’ only messaging network all of a sudden came to a halt amid FX trading; this could stop trading completely. The introduction of the TNN is poised to eliminate the “Hobson’s choice” that has defined the FX industry’s service offering until now. It represents a significant step forward in bolstering the industry’s resilience against systemic risks – and by effect the safeguarding of the entire financial ecosystem”, Andy Coyne added.
CobaltFX highlighted that the threat of SPoFs should be a wake-up call for the financial sector to assess industry-wide – and not just in FX.