Lessons from other asset classes
Existing structure
Existing opportunities
Leveraging technology
Introduction
Precious Metals Market Post-Trade Spotlight Review
Case Study
Project Jura, an experiment conducted by Banque de France (BdF), the Bank of International Settlements Innovation Hub (BISIH), and the Swiss National Bank (SNB), included the use of wholesale Central Bank Digital Currency (wCBDC) for cross border payments and settlements, together with a private sector consortium. Project Jura involved the issuance of intraday wCBDCs and tokenised Commercial Paper settled between France and Switzerland on a Distributed Leger Technology platform. wCBDCs were issued when funds were transferred to central banks in the respective Real Time Gross Settlement (RTGS) systems either directly, or through correspondents. Project Jura demonstrates cross-border instantaneous settlement and DvP on a single user platform. Whilst the technology involved remains at an experimental stage, a similar solution could be beneficial for the precious metals market. CLS Group offers a settlement platform for FX. This involves both participants to a trade instructing CLS of such a trade, which is then matched. At the start and end of each day, a settlement member’s multicurrency account has a zero balance. Multilateral net positions are funded and paid out using a daily organised schedule. Members pay and receive funds through CLS’s central bank account in each currency via their own accounts or nostro bank accounts. CLS offers their settlement members a liquidity management service for in-and-out- swaps. This service, combined with multilateral netting, results in an average funding requirement of less than 1% of the total value of all trades for participating settlement members. This tool mitigates risk and reduces account funding requirements by an average of 96%. Although FX and precious metals are different asset classes, the market and trading structure share similarities. Alternative solutions which offer more effective confirmation and settlement may be applicable to the precious metals market.
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Project Jura
Learning lessons from other asset classes
FICC markets have adopted holistic technological solutions which are reflected in the case studies on this page. Incorporating new technology and innovations to the post-trade processes in precious metals markets, if properly designed and implemented, will make the post-trade process more efficient and both market participants and clients will see the benefits. They will require significant investment initially but may well see the benefits outweigh the costs in the longer term. Adoption of new technology has been tested across different markets. For example, ‘Case Study: Project Jura’ highlights a market example where tokenised solutions were adopted for a market experiment.
Case Study
CLS in FX case study
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