A blockchain based platform that will permit asset managers to trade in the Forex market without a need for major investment banks is being tested by the Vanguard Group.
The US registered investment advisory firm, Vanguard, is trying to grab a share of the currency trade processing market which sees volumes of over $6 trillion per day and controlled by financial institutions such as JP Morgan Chase and Deutsche Bank AG.
According to news sources, the recently tested blockchain platform has been under use for more than two months while managing numerous trades. Vanguard hopes to disrupt the Forex market settlement business which has been dominating the industry for several decades.
However, Campbell Adams, an ex-senior currency trader at Deutsche Bank, believes that Vanguard can become a dominating player only if adequate clients sign up for the blockchain platform. Adams said:
“In theory, it sounds great because you can reduce your costs if you can match directly with someone else who has a countervailing interest. Yet it will require a critical mass of users.”
Vanguard, which manages more than $5 trillion worth assets, is “currently piloting a project focused on improving the efficiency and reducing the risk of FX hedging.”
OCBC turned out to be the first Singapore headquartered bank to become member of JP Morgan Chase’s blockchain network and is one of the 134 banks in the Asia-Pacific region that are partakers in the Interbank Information Network (IIN).
Deutsche Bank, Germany’s largest, has become member of IIN in September. JPMorgan stated that it is aiming to sign up 400 clients by the end of 2019 and hinted that more number of banks that may join the network in the future.