Capitolis unleashes FX novation service
Capital markets tech provider Capitolis has launched a novation service in foreign exchange (FX).
Citi, HSBC, BlueCrest and Brevan Howard, among other market participants, have collaborated with Capitolis on this service, which is the “first of its kind in FX”.
If you have no freaking idea what novation means, then Capitolis helpfully explains it is a defined legal term that refers to the practice of replacing an existing counterparty in an existing trade with a new counterparty.
The firm says this practice is commonplace in interest rates trading but is not within FX. In FX there exists a protocol defined by the International Securities and Derivatives Association (ISDA) that parties “can choose to follow, which is however, not mandatory”.
Gil Mandelzis, CEO of Capitolis, says it is going live with the solution in the next few weeks and “will roll out significant further functionality throughout this year”.
No specifics on that functionality and the solution is currently being tested.
Capitolis Novation automates the currently manual workflow in both FX prime broking and bilateral trading.
The service helps “mitigate against costs and inefficiencies linked to the manual process of novation that banks currently employ to meet their regulatory capital requirements as well as managing client credit capacity”.
With this service, Capitolis says it automates the novation process for all market participants, including prime brokers, executing banks, hedge funds and real money managers, for all FX instruments including options, swaps, forwards and non-deliverable forwards (NDFs).
In March, Capitolis secured $29 million in funding from Sequoia Capital and Index Ventures in a seed and Series A round.
