GFF: Technology to the rescue
02 February 2024 Luxembourg
Image: danylamote
Intraday liquidity management is a large and growing problem for banks, agreed panellists at this year's GFF summit.
Issues include settlement and payment fragmentation across time zones, creating liquidity drain and credit risks, and high costs associated with maintaining large buffers to cover intraday liquidity needs.
For one panellist, “these problems will persist unless technology can be used to solve them”.
As self professed “big believers in a digital future”, the panel emphasised how distributed ledger technology (DLT) and digital currencies could help to overcome these issues.
Erica De Rosa, solutions architect at HQLAX, discussed the various uses of automation. “When we started developing these solutions, new technology was really used to improve the existing problems that we had.” Now, she argues, DLT can enable new markets, posing the idea that transactions could be intraday and instantaneous.
However, there are hurdles to this being achieved. For De Rosa, “it's about proving the resilience and stability of these platforms and demonstrating their benefits and necessity in the markets. We need to get past the buzzwords and just have a regular conversation when discussing the merits of the technology.”
Brian Nolan, co-founder and CEO of Finteum, continued: “Adoption by more and more participants is going to be important. With banks like UBS, NatWest and Commerzbank getting involved in digital repo and intraday, there is a great business case for it for all market participants.”
Pivotally, Nolan is optimistic for the future: “I believe that 2024 is going to be a year where more and more participants come in and start realising those benefits.”
However, another panellist was more hesitant about the uptake of automation: “Put simply, the buy side is not there yet.” Instead, he argued, the focus should be on building infrastructure and technology that will allow the buy-side community quick finality of settlement.
In summary, he said that if this can be achieved “it will open up the global landscape”.
Issues include settlement and payment fragmentation across time zones, creating liquidity drain and credit risks, and high costs associated with maintaining large buffers to cover intraday liquidity needs.
For one panellist, “these problems will persist unless technology can be used to solve them”.
As self professed “big believers in a digital future”, the panel emphasised how distributed ledger technology (DLT) and digital currencies could help to overcome these issues.
Erica De Rosa, solutions architect at HQLAX, discussed the various uses of automation. “When we started developing these solutions, new technology was really used to improve the existing problems that we had.” Now, she argues, DLT can enable new markets, posing the idea that transactions could be intraday and instantaneous.
However, there are hurdles to this being achieved. For De Rosa, “it's about proving the resilience and stability of these platforms and demonstrating their benefits and necessity in the markets. We need to get past the buzzwords and just have a regular conversation when discussing the merits of the technology.”
Brian Nolan, co-founder and CEO of Finteum, continued: “Adoption by more and more participants is going to be important. With banks like UBS, NatWest and Commerzbank getting involved in digital repo and intraday, there is a great business case for it for all market participants.”
Pivotally, Nolan is optimistic for the future: “I believe that 2024 is going to be a year where more and more participants come in and start realising those benefits.”
However, another panellist was more hesitant about the uptake of automation: “Put simply, the buy side is not there yet.” Instead, he argued, the focus should be on building infrastructure and technology that will allow the buy-side community quick finality of settlement.
In summary, he said that if this can be achieved “it will open up the global landscape”.
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