BME launches new system to settle FX transactions
04 April 2025 Spain
Image: Nirusmee/stock.adobe.com
Bolsas y Mercados Españoles (BME) has obtained approval to implement a system for settling foreign exchange transactions in a payment-versus-payment (FXS) mode.
Approved by the Bank of Spain, the new system will aim to eliminate the principal risk of FX transactions that are settled bilaterally — where one of the counterparties would face the loss of the total transaction amount if the other did not deliver the sold currency.
FXS is built on a centralised settlement model using commercial bank accounts, the system primarily handles spot transactions but can also settle FX forwards and FX swaps.
The project arises from the demand received from some banks and financial institutions as a solution to the inherent problems of bilateral currency settlement, including the rapid consumption of credit lines, which reduces the potential business between entities.
According to the BME, the payment-versus-payment settlement provided by FXS will reduce the reliance on credit lines, increasing the volume and number of possible counterparties.
The FXS system will also allow the integration of the service into the SWIFT network and the netting of all transactions between two counterparties, which BME believes simplifies settlement operations, reduces costs, and optimises capital usage.
It will be made available to any financial institution in the EU and Switzerland.
Commenting on the new system, José Manuel Ortiz, head Securities Services at SIX, says: “We are convinced that our neutral position as an operator of financial markets and the robustness of our technical infrastructure will allow us to offer a high-quality and highly available system to participants.
“The implementation of the FXS system represents an important step towards greater efficiency and security in foreign exchange transactions in Europe.”
Approved by the Bank of Spain, the new system will aim to eliminate the principal risk of FX transactions that are settled bilaterally — where one of the counterparties would face the loss of the total transaction amount if the other did not deliver the sold currency.
FXS is built on a centralised settlement model using commercial bank accounts, the system primarily handles spot transactions but can also settle FX forwards and FX swaps.
The project arises from the demand received from some banks and financial institutions as a solution to the inherent problems of bilateral currency settlement, including the rapid consumption of credit lines, which reduces the potential business between entities.
According to the BME, the payment-versus-payment settlement provided by FXS will reduce the reliance on credit lines, increasing the volume and number of possible counterparties.
The FXS system will also allow the integration of the service into the SWIFT network and the netting of all transactions between two counterparties, which BME believes simplifies settlement operations, reduces costs, and optimises capital usage.
It will be made available to any financial institution in the EU and Switzerland.
Commenting on the new system, José Manuel Ortiz, head Securities Services at SIX, says: “We are convinced that our neutral position as an operator of financial markets and the robustness of our technical infrastructure will allow us to offer a high-quality and highly available system to participants.
“The implementation of the FXS system represents an important step towards greater efficiency and security in foreign exchange transactions in Europe.”
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