BNY Mellon and Deutsche Bank announced July 8 that they have jointly developed a new API-enabled foreign-exchange (FX) solution that can dramatically improve confirmation times for restricted emerging-market currency trades.
The digital solution, initially being applied to custody FX transactions in Korean won, aims to reduce the pre-trade lifecycle to seconds from hours, minimizing the operational burden and manual intervention that can be prevalent in emerging market custody FX.
The solution is already live in Korea, with the Indonesian rupiah and the Indian rupee targeted next. Subsequently, it will be progressively rolled out to a broad range of restricted currencies, which are linked to investors’ underlying equity or fixed-income transactions.
Leveraging existing bots between the two banks for instantaneous communication to help eliminate market frictions, the solution can also bring trade remediation closer to the time of execution. The resulting benefits can also reduce price slippage for clients between the FX leg of a transaction and the equity or fixed income security trade.
Digital innovation in FX markets is accelerating in emerging markets, particularly in Asia, because securities denominated in those currencies are increasingly being included - or more heavily weighted - in emerging-market indices and exchange-traded funds (ETFs).