Earlier this year, credit optimization specialist CobaltFX announced that BNP Paribas and NatWest had started using its technology to manage credit exposures for FX trades on interbank trading venues.
According to a report produced by the Global Financial Markets Association’s global foreign exchange division in June, broader adoption of dynamic credit solutions would enhance the FX market structure for the benefit of all institutional market participants by facilitating increased trading opportunities and meeting client demand when and where it is needed most.
By simplifying and streamlining the allocation of credit for FX transactions between banks, CobaltFX believes it can improve access to liquidity and capitalize on a trend of financial institutions optimizing the disbursement of credit for FX trades to improve market access and control.
As Joe Nash, digital COO of global macro at BNP Paribas, observes, improvements to the manual process of updating credit limits with interbank trading venues are badly needed, and aggregating IT infrastructure across multiple venues gives banks the ability to proactively manage credit exposure.
The allocation of credit for FX transactions between banks has experienced varying degrees of automation in recent years, influenced by a number of factors, including the technological capabilities of the bank, regulatory requirements, risk management strategies, and the use of advanced tools and platforms.