Sell-Side Technology Awards 2022: Best distributed-ledger technology project—Baton Systems

OVERVIEW

Baton Systems (Baton) focuses on improving sell-side firms’ front-to-back post-trade processes. Its technology includes a shared permissioned, distributed ledger that integrates with banks’ existing infrastructure, directly connecting their disparate ledgers and establishing a fast, compliant payment gateway for the settlement of all asset classes, with no currency or minimum value barriers. The firm’s interoperable and connected digital market infrastructures offer solutions from trade matching through to settlement, allowing financial institutions to take control of the entire process with automated, rules-based workflows, access to real-time information, and on-demand settlement. 

THE SOLUTION

With its solutions already being used by banks including HSBC and Wells Fargo, Baton’s distributed-ledger technology (DLT) enabled the industry’s first interbank payment vs. payment (PvP) settlement outside of CLS (in December 2021) using its Core-FX solution, governed by the Baton rulebook. This technology, which can be implemented alongside existing legacy settlement infrastructure, extends access to riskless settlement to all market participants, allowing FX businesses to reduce their settlement exposure across all currencies, including emerging market currencies, currently ineligible for PvP settlement via CLS.

These currencies can now be securely settled using DLT that provides flexibility and transparency in less than three minutes. Counterparties can settle immediately and on demand, multiple times a day without the liquidity constraints that pre-funding introduces. This is achievable with a level of flexibility that allows the parties to not only choose how they net or whether they settle in gross, but also to align settlement timeframes with corresponding liquidity events. Alongside Core-FX, Baton offers three other solutions: Core-liquidity, Core-Collateral and Core-Payments, each designed to transform the payments and settlements processes across different post-trade requirements. Collectively, the solutions are known as CORE.

WHAT’S TO COME

Over the next 12 months, Baton will look to onboard a number of new banks to the Core-FX platform. The system is able to cope with an unlimited number of banks from geographies across the globe, with each new party added to the platform incrementally reducing risk.  

WHY THEY WON

Distributed-ledger technology, once the great hope of the financial services industry, is now finding genuine use-cases to which it can be applied. Baton Systems’ Core FX offering is a good example of such an application, the advantages of which are easy to see: a significant reduction in settlement risk across FX markets, especially when it comes to emerging market currencies, plus appreciably shortened settlement timeframes for foreign exchange trades.