FX HedgePool has officially launched its new buy side-to-buy side matching utility – FXHP. Founded by industry veteran Jay Moore, along with co-founders Richard Leader and Emin Tatosian, the company has gained the attention of some of the world’s largest institutional investors – several among the first to successfully match positions last Friday.Standard Chartered Bank has taken the lead as the first credit provider – enabling participating members to independently match liquidity while ensuring secure credit and settlement.
“We couldn’t be more excited about the partnerships we’ve formed on both the buy side and sell side,” says FX HedgePool CEO, Moore. “Our vision is to enhance transparency in the FX markets by creating a viable, sustainable, and trusted utility that is shaped and inspired by the people who use it.”
The lure for the buy side is simple: currently, the on-going requirement to roll their passive hedging programs on a monthly basis is time-consuming, risky, and often expensive. With FXHP, buy side firms have the opportunity to become part of a curated community where they can consistently, safely, and predictably match liquidity amongst peers with naturally offsetting passive hedging flow.
Buy side trading desks can now directly access a new source of peer liquidity via “an application that’s sophisticated yet simple to use,” according to co-founder Tatosian: “From the start, we resolved to create a system that seamlessly slots into existing workflows with little to no direct integration requirements for its users. Our 2020-21 roadmap, shaped in collaboration with our members, continues this trend with a strong and exciting array of enhancements.”
While the buy side is excited about peer-to-peer liquidity matching, many on the sell side see participating on FXHP as a credit provider as an opportunity to capture market share without taking on principal market risk while monetising their balance sheets.
Moore states that of the banks his team has spoken to, many consider the monthly rolls to be burdensome, low-margin, and high risk – making the notion of carving out a portion of existing credit lines to secure annuity-like revenues appealing. Moreover, Moore’s team – in close collaboration with participating members – is actively engaged with a select number of premier banks that see this as an opportunity to provide additional value to their clients and help the buy side fulfil its fiduciary duties concerning best execution.
Luke Brereton, Co-Head Prime Services, Standard Chartered Bank, says: “FX HedgePool has opened up a very large market for us to provide credit intermediation services, where we have a great opportunity to earn a return by deploying capital through the credit relationships. We’re providing a central credit model that is helping the buy side separate credit provision from the search for liquidity and we’re also supporting access to multiple additional credit participants, which is a really attractive mechanism.”
Moore adds: “Standard Chartered Bank has been an innovative partner, not only signing on as the initial credit provider, but helping us develop and facilitate a multilateral credit allocation model that will allow us to maximise our matching potential by offering our members access to a diverse panel of participating credit banks.”
Moore concludes, “Best execution goes far deeper than just price. It’s about being able to step back and evaluate the many factors surrounding the trade; including spreads, market impact, tracking error, operational risk, and counterparty management – all of which are core to our value proposition.”