FX Post-Trade Network Set To Launch
Henry Ritchotte, former chief operating officer of Deutsche Bank, has invested in Cobalt, the network that aims to reduce post-trade costs in foreign exchange by up to 80%.
Cobalt is a private peer-to-peer network that reduces post-trade costs and risk for institutions operating across all FX products. Trades can be executed on any platform and Cobalt creates a unique verified transaction on shared post-trade infrastructure.
Adrian Patten, co-founder of Cobalt, told Markets Media: “True power comes from the network effect of using the same data in the same format which removes the need for multiple reconciliations.”
Cobalt has developed a range of processes middle and back office that can plug into any distributed ledger technology.
“We create a unique verified transaction, hash it and can store it on any ledger,” he added. “We looked to solve a business problem using the right technology rather than developing a shared ledger and then working out how to use it.”
Patten previously founded Mako FX and was chief executive from launch until the institutional spot brokerage was sold in 2014. Andy Coyne, co-founder and chef executive of Cobalt, is the former chief executive of Traiana, the NEX Group business which monitors pre-trade risk and automates post-trade processing of financial transactions.
Yesterday Cobalt announced closing an investment from Ritchotte who will also become a member of Cobalt’s strategic advisory board. Another strategic advisor is Charlotte Crosswell, former chief executive of Nasdaq NLX, the US exchange’s start-up derivatives market in London.
Ritchotte spent over two decades at Deutsche Bank where he was a member of the management board and group executive committee as chief operating officer and chief digital officer. He left the bank at the end of 2016 and established RitMir Ventures, a principal investment firm focused on investing in products and services transforming finance.
Patten added: “Henry’s investment shows that he agrees with our numbers for the cost cuts that can be achieved.”
Ritchotte said in a statement: “There has been comparatively little investment in post-trade over the past few decades. Cobalt’s network is an elegant solution that provides significant benefits for users and will reshape the industry as we know it.”
Market makers Citadel Securities and XTX Markets joined as Cobalt as launch participants in May taking the number of test participants to 22, including Citi, which became an investor last year. Cobalt also opened a New York office in May.
Patten said Cobalt is due to go live later this year. Then firm is in the process of signing contracts with more clients and wants to launch with a group of banks.
“We are testing with live transactions so clients can see Cobalt working,” added Patten. “I used to run an ECN so am comfortable that we have execution-grade technology.”
Last month Cobalt announced a partnership with BestX, a fintech company that has developed a suite of FX best execution analytics. BestX was formed in 2016 by Morgan Stanley alumni Pete Eggleston, Oliver Jerome & Aman Thind. Patten added that any third-party provider can provide services to Cobalt clients once they have permission.
“Incumbent service providers have launched proofs of concept but do not specify what their product will do, the price or the cost saving,” Patten continued. “In contrast, we have a tangible product, price list and have set out cost savings.”
New firms may value being able to test in more than one jurisdiction.
Aim is seamless interaction across digital ledgers.
UK regulator is open to all forms of deployment provided operational risks are properly mitigated.
Britain should realize all the benefits of the Fourth industrial revolution.
Nascent technology is already showing traction in private placements and post-trade.