“Life is really simple, but we insist on making it complicated.”
― Confucius
FXCH is a new approach to Spot-FX clearing. Our settlement technology is remarkable in its simplicity. Our goal is simple: cut out superfluous steps in the trade clearing process, thereby leaving out unnecessary associated costs.
FXCH (Hong Kong) Ltd. has partnered with 24Exchange (Bermuda) Ltd. to offer a Clearing and Settlement option to Crypto cash institutional market participants. The service, available to all 24Exchange members, provides the first clear demarcation between trade execution, margin/risk management and settlement for the Crypto asset class.
FXCH’s virtual Clearing Hub allows trading on any participating e-FX venue and settle on-Ledger from a unique consolidated account.
Access to the FX Markets has been choked in the past few years due to cost of credit and banks “exclusive right” to participate. FXCH is open to all qualifying institutions.
Users collateral is held in trust at our custodian bank. Limits are communicated to e-FX platforms in real time. Members and Users can access the distributed ledger and control their cash.
At maturity, settlements are effected electronically on-Ledger without a need to move or transfer cash.
Blockchain is a transaction database based on a distributed cryptographic ledger that is shared with all the nodes in a system.
Users (or their agent) transfer collateral to the Clearing House. FXCH records cash on a distributed ledger accessible to all participants, in effect creating a digital proof of ownership. With their digital public and private key signatures, Users see/control their balances in real time. They can reconcile the total balances on the ledger with the publicly available statement of the Deposit Bank. As FXCH does not hold any position, its settlement cash ledger entries are always zero sum.
On Value Date, maturing contracts generate settlement entries on the distributed ledger. The affected Users can see the result on their copy of the ledger in real time. When trades mature, FXCH effects a double accounting entry on the ledger with the Net currency positions to settle. The combination of novating FX trades to the Clearing House and effecting dematerialised Ledger-based settlements simplifies and dramatically cuts FX clearing costs.
FXCH operates a classic real time risk monitoring of all accounts and “reserves” the relevant amount of digital collateral to secure FX positions, adjusting it automatically. Mitigation of default risk is achieved by the contribution of new equity investors to a guarantee fund (subordinated loan) and automatic liquidation for under-margined accounts.
STP enables the entire trading process to be conducted electronically without the need of manual intervention. It eliminates any conflict of interest between the parties and reduces the execution time. When a User or Member trades on an FX venue, the e-FX platform sends an STP message to FXCH. Once both sides of a trade get confirmed to FXCH, novation can occur.
Open Source Code
Free API to distributed Ledger
10 years+ maturity
How to participate
There are three types of options for participation in FXCH, depending on the size, volume and price sensitivity of your institution. Direct members need to contribute to the Guarantee Fund with either a deposit or higher fees. Additionally, individual Clients may open an account with a Member and internally negotiate their account parameters.
The Client of a Member is only subjected to margin collateral requirement, with a minimum at the discretion of the Member agent. In case an account opts for the “higher security” margin requirement, a fee discount is applied to the account.
The General Clearing Member (GCM) needs to contribute a minimum of $5M to the Guarantee Fund. The contribution remains his property but represents a capital buffer in case of an account or another member default. The GCM can offer to its Clients segregation of collateral at the Clearing House level.
The Individual Clearing Member (ICM) either contributes a minimum of $1M to the Guarantee Fund, or pays higher fees that will in part accrue to the GF. A higher margin requirement is associated to the non-contributing ICM’s.
Simple, risk based
| Membership Type → | GCM | ICM | ICM Lite | Client of Member | |
|---|---|---|---|---|---|
| Fee → | $1/Mio | $2/Mio | $5/Mio | Member’s discretion | |
| Guaranty Fund | $5M | $1M | N.a. | N.a. | |
| Min. Deposit | $1M | $1M | $500k | Member’s discretion | |
| Max. NOP | $100M | $20M | $10M | Member’s discretion | |
| Initial Margin | 3% | 3% | 4% | 3% | |
| Maintenance | 2% | 2% | 3% | 2% | |
| Closeout | 1% | 1% | 2% | 1% |
Many pundits will offer their views on the reasons of FXCM’s unfortunate fate. Focus will incorrectly point to market abuse, misleading customers and despicable FX desk practices.
Get to know FXCH in 120 seconds.
As our unique Blockchain clearing settlement illustrates, we are open to new and great ideas. FXCH is collaborative and community oriented. We invite all members to actively take part in the development of this service and have their say.