SpectrAxe has partnered with OSTTRA to offer an end-to-end service from price discovery through to execution, booking, and risk management in the FX options market.
The integration of SpectrAxe’s central limit order book (CLOB) for over-the-counter (OTC) FX options with the OSTTRA post-trade network underscores the commitment of both firms to innovate and drive efficiency in the FX options market.
First and only electronic CLOB for OTC FX options
Traditionally, the booking of trades could take anywhere between several minutes and, in some cases, hours, but now this process can be completed in just one or two minutes, SpectrAxe stated.
SpectrAxe is the first and only electronic CLOB trading platform that facilitates all-to-all trading for OTC FX options, allowing hedge funds, proprietary trading firms, regional banks, and market makers to trade anonymously via their FX prime broker (FXPB) relationships on a lit marketplace, offering transparency into the liquidity available for bid/offer quotes for all trading participants.
The trading industry will be able to move away from its traditional reliance on voice- and chat-based execution, or single-dealer platforms.
By connecting to the OSTTRA FX trade processing network, traders on SpectrAxe’s platform will benefit from real-time trade notifications booked directly into their risk systems, addressing the critical need for automating the post-trade FX workflow as market participants continue to seek greater cost reductions and transparency. SpectrAxe has integrated FIX protocol with OSTTRA to ensure seamless connectivity and efficiency.
“A significant milestone in the FX options market”
SpectrAxe is expected to revolutionize the OTC FX Options ecosystem by solving many of the credit, technological, and regulatory issues that have fragmented the options liquidity landscape. The firm has created a single anonymous venue, unlocking unprecedented liquidity for all participants.
Alvin Chopra, Chief Operating Officer at SpectrAxe, commented: “Our partnership with OSTTRA marks a significant milestone in the FX options market. By combining our price discovery and execution capabilities with OSTTRA’s robust post-trade solutions, we are setting a new standard for efficiency and transparency. This end-to-end service reduces the complexity and time traditionally associated with trade booking and risk management, offering unparalleled benefits to our clients.”
Patrick Philpott, Product Design Lead, FX & Securities at OSTTRA, added: “We are thrilled to collaborate with SpectrAxe to bring this groundbreaking solution to the market. Automating the post-trade workflow is crucial for enhancing operational efficiency and reducing risk. Our combined expertise provides market participants with a streamlined, automated process that not only saves time but also significantly reduces the potential for errors.”
OSTTRA launched FX PvP settlement service
OSTTRA recently launched a FX PvP (payment versus payment) settlement service powered by Baton Systems. FX PvP settlement addresses the escalating Herstatt risk, as identified by major financial institutions like the BIS (Bank for International Settlements), the European Central Bank (ECB), and the Global Financial Markets Association (GFMA).
The service aims to enhance the security and efficiency of FX settlements, a concern heightened by the transition to T+1 settlement for securities in North America starting May 28, 2024.
Leveraging Baton Systems’ advanced distributed ledger technology, OSTTRA’s FX PvP settlement service is designed to not only mitigate settlement risk but also optimize intraday funding, liquidity, and credit risk. It will be accessible to a wide range of market participants including banks, investment managers, and corporates.
The firm has plans to eventually include settle-to-market functionality, significantly reducing derivative counterparty exposures, therefore reducing the regulatory capital required under SA-CCR (Standardised Approach to Counterparty Credit Risk).
The initiative comes in response to warnings from global financial institutions about the risks associated with FX settlement outside of traditional PvP platforms. The service specifically targets transactions not currently covered by CLS, aiming to include non-CLS eligible currencies and providing greater flexibility for intraday settlements.
