Cobalt focuses on the post-trade aspect to expedite settlements and reconciliation. Recently, FX platform Cobalt went live with Deutsche Bank, XTX Markets and Saxo Bank as its first clients. There’s already an existing distributed ledger technology system used by the incumbent players. The two firms have previously worked together on a project for sharing index data. Vanguard’s platform is being developed by blockchain technology firm Symbiont. “That is pretty intriguing, especially for the foreign exchange markets which only really started to seriously explore this topic in recent months.” “There is still a tremendous amount of interest in the potential for disintermediation, whereby trading would be decoupled from banks and price discovery could potentially happen in outside platforms where there might be better facilities to enable peer-to-peer matching,” said Maack.

In a recent interview with The Trade, Vanguard’s head of FX trading, Andy Maack spoke about the opportunity without referring specifically to the project. So it remains to be seen if the Vanguard initiative could offer competitive prices. The massive foreign exchange market has an enormous amount of liquidity provided by these banks and intermediaries. “In theory, it sounds great because you can reduce your costs if you can match directly with someone else who has a countervailing interest,” said Campbell Adams, a former senior currency trader at Deutsche Bank told Bloomberg. But the challenge for such a project is getting a sufficient number of players on board. The global currency market handles $6 trillion in trades daily. Hence the participants will be able to circumvent the traditional banks and other intermediaries to reduce the cost of currency trades. The system is aimed at institutional asset managers to enable peer to peer trading. The world’s largest mutual funds provider Vanguard is planning to use blockchain for a new foreign exchange platform.

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