Vanguard Partners with Symbiont to Bring Blockchain to FX Market

Mutual fund giant Vanguard Group wants to revolutionize the $6 trillion-a-day FX market with Blockchain Blockchain Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned). In this sense, blockchain is immune to the manipulation of data, making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamp Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned). In this sense, blockchain is immune to the manipulation of data, making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamp Read this Term, taking the first leap to Bridge Bridge The bridge or liquidity bridge is an essential component for brokers that are enabling their clients to trade at interbank rates directly via a Prime Broker or a Prime-of-Prime (PoP). While market makers do not require a bridge in order to service their clients, brokers which are sending through orders to a liquidity provider or an electronic execution venue need a bridge to connect their trading platform to the interbank market.Bridges are used extensively in forex trading, specifically for Met The bridge or liquidity bridge is an essential component for brokers that are enabling their clients to trade at interbank rates directly via a Prime Broker or a Prime-of-Prime (PoP). While market makers do not require a bridge in order to service their clients, brokers which are sending through orders to a liquidity provider or an electronic execution venue need a bridge to connect their trading platform to the interbank market.Bridges are used extensively in forex trading, specifically for Met Read this Term the gap by partnering with Symbiont, a six-year-old New York startup.

Vanguard quietly began using Symbiont’s product that has already handled some FX trades since August, a person familiar with the matter told Bloomberg. Now, after two months of tried and true use, the global asset manager is making the partnership public, with looks to challenge a handful of banks that don’t show any sign of weakening their grip on the FX market.

Symbiont is a Fintech that provides institutional applications of blockchain technology. Symbiont, which raised $20 million led by Nasdaq Ventures, reports they are currently working with companies like Citi, Ranieri, and Vanguard.

Vanguard said the pilot had reduced the cost of settling foreign exchange trades through its blockchain-based system, offering a glimpse of the savings the technology could offer.

Vanguard, however, did not give precise figures for pilot transactions but said that a significant amount of overall internal flows are likely to be settled on the system in the next few years.

“There’s a tremendous amount of in­terest in the potential for disintermediation,” Andy Maack, Vanguard global head of FX trading, said.

The asset manager is aiming to provide the blockchain tools mainly to corporate clients with a greater focus on swaps and forward markets rather than spot trading.

The idea behind Vanguard’s blockchain experiment is to help FX asset managers reduce costs through a peer-to-peer trading model that avoids big investment banks. But while the cost savings could prove appealing, such a platform will require a critical mass of users "if it wants to bring a discount advantage to the massive sector,” a former Deutsche Bank FX trader told Bloomberg.

In addition, financial institutions have so far taken a cautious approach with the technology as they were concerned by uncertainty over security, regulation, and the impact on existing systems.

“Vanguard is currently piloting a project focused on improving the efficiency and reducing risk of FX hedging,” company spokeswoman Carolyn Wegemann said.