Franck Mikulecz
Franck Mikulecz

FX Clearing House: How Blockchain could triple Spot-FX liquidity

The creation of a digital distributed ledger Clearing House promises to increase participation in Spot FX markets, breaking a choke on the current access to liquidity. When non-bank electronic market makers entered the FX space they found a set of rules and agreements from the 20th century. The sell-side dominance of liquidity provision, based on the size of their balance sheets, gives them an untenable grip on who can trade with who. Now Baxter-FX has designed a model that will allow all-to-all trading in Spot-FX, by creating central clearing with a distributed ledger called “FXCH” (FX Clearing House). e-Forex talks to Franck Mikulecz, Managing Director of the firm to learn more about it.

First Published: e-Forex Magazine 72 / CryptoCurrencies / July, 2016

Franck who are you courting to support this idea? Some of the largest eFX market makers are trying to get customers to trade with them directly. They are capable of offering fantastic liquidity on and outside of trading platforms. Despite the eFX market makers and hedge funds wanting to do this, they cannot access the FX market without the help of a prime broker today. Right now some prime brokers are becoming very obstructive.  Yet some of the tier 1 banks have calculated that it is not worth lending their capital for prime brokerage customers to use. Some completely pulled out, others take only the most lucrative customers in this field, a few have remained for now. What is the opportunity?  Based on the size of the futures markets for FX and the number of people that we see that are “unbanked”, I believe that if the market was equally accessible to all parties it would be at least 50 per cent larger now and up to three times larger over a period of two or three...continued

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