FX HedgePool, a matching engine for mid-market execution of FX swaps, has completed its first match aligned with International Monetary Market (IMM) dates.
With this initial transaction, which involved BNP Paribas and Standard Chartered Bank as the credit providers to the buy-side counterparties, FX HedgePool is introducing discrete FX matching sessions based on each quarterly IMM date.
Most buy-side participants hedge their foreign currency exposures on their bond and equity positions either monthly or quarterly. FX HedgePool conducts an end-of-month roll that allows passive hedgers to provide liquidity directly to each other. By adding a quarterly cycle in line with IMM dates, FX HedgePool is curating liquidity that aligns with the hedging schedule of many buy-side institutions.
By pooling orders on specific trade execution dates ahead of quarterly IMM settlements, the firm is addressing the problems of information leakage and market impact related to the disparate timing of buy side trading during each IMM cycle. Introducing a single liquidity event for each IMM date for passive hedgers allows programmatic rolls to be automated based on safe, predictable and reliable liquidity, sidestepping the risks of uncertainty for each roll, helping reduce costs and operational risk. It allows financial firms to direct resources away from high-risk, routine tasks to more strategic market opportunities.
“Buy-side traders face the risk, cost and hassle of rolling positions simply to maintain a passive hedging mandate,” says Jay Moore, CEO and Founder of FX HedgePool. “As we’ve done with the monthly matching events, creating a safe and reliable marketplace with mid-market matching around the highly traded IMM dates is a natural evolution for us.”
“We are excited to support FX HedgePool achieve another milestone by launching IMM rolls,” says Matthew Walsh, Head of Sales for Prime Services in the Americas at Standard Chartered. “Our partnership with FX HedgePool demonstrates our continuous commitment to deliver innovative solutions to our clients.”
“At BNP we are always in search of innovative solutions to offer to our clients,” says Asif Razaq, Head FX Algo Execution at BNP Paribas. “Joining FX HedgePool on this initiative allows us to offer more flexibility to meet our clients’ demands.”
In the OTC FX markets, the IMM dates correspond with the expiration of the FX futures contract on the third Wednesday of March, June, September, and December.
